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Foreword This study seeks to analyse and evaluate successive reforms of the Common Agricultural Policy (CAP). Chapter 1 presents the scope of policies covered by the study. Chapter 2 gives an overview of the agricultural situation in the European Union. Chapter 3 describes the main characteristics of the CAP in 2010 and illustrates how OECD indicators of support to agricultural producers can be used to monitor policy developments over the last 25 years. Chapter 4 analyses the impact of agricultural policy reforms on the economic and environmental performance of agriculture. Chapter 5 draws conclusions concerning the reforms using the principles and operational characteristics established by OECD Ministers for the evaluation of agricultural reform efforts across OECD countries. It makes some recommendations concerning the continuing search for policy measures that are effective and minimally distorting, while also contributing to the achievement of the objectives set for the sector.
Acknowledgement Catherine Moreddu is the main author of this study, which includes contributions from Roger Martini (PEM analysis) and Shingo Kimura (domestic and world price variability). Wolfgang Britz, Alexander Gocht of Bonn University and Ignacio Pérez Domínguez provided the CAPRI analysis, and Kaley Hart and David Baldock of the Institute for European Environmental Policy (IEEP) provided an evaluation of the impact of CAP reforms on the environmental performance of agriculture. This study also benefitted from valuable contributions given at the OECD Workshop on the Disaggregated Impacts of CAP Reforms, which took place in Paris on 10-11 March 2010, the proceedings of which are published in OECD (2011a), Disaggregated impacts of CAP reforms, OECD, Paris. Editorial assistance was provided by Michèle Patterson.
Executive Summary The Common Agricultural Policy (CAP) is the first common policy adopted by the European Community under the Treaty of Rome. It was originally put in place to regulate agricultural markets and to support domestic commodity prices, while structural and environmental measures were gradually developed afterwards. The 1992 MacSharry reform marked the beginning of a series of reforms by which expected income losses due to reductions in price support and protection were partly compensated by direct payments, originally based on current area and animal numbers. The 2003 reform introduced fixed payment entitlements based on historical, regional or hybrid references, which do not require production of any commodity, to replace part or all of MacSharry payments. Subsequent reforms of commodity sectors and the Health Check of the CAP in 2009 have consolidated the movement towards de-linking payments from current production parameters initiated by the 2003 reform and strengthening measures, whose declared objectives are to contribute to improving the competitiveness of the agricultural and forestry sectors, the environment and the countryside, as well as the quality of life in rural areas.
Purpose and Scope of the Study As an introduction to the study, this chapter explains that the analysis covers reforms of the Common Agricultural Policy (CAP) of the European Union over the period 1986-2010 and that these reforms are evaluated using principles for agricultural reform agreed by OECD ministers.
Overview of Developments in the European Agricultural Sector As a result of successive enlargements of the European Union, its agricultural sector has become larger and more diverse. The European Union is the largest importer of agro-food products and the second largest exporter after the United States. This chapter begins with a brief look of the evolving role of agriculture in the economy of EU member states. It analyses developments in farm production, land use, productivity, price levels and variability, and provides an overview of developments in the characteristics of farms and farm households. It also provides an overview of EU agro-food trade patterns.
Agricultural Policy Reforms in the European Union Successive reforms of agricultural policy in the European Union (EU) have progressively and significantly reduced levels of protection and changed the way support is delivered to farmers. This chapter first describes the main characteristics of the Common Agricultural Policy (CAP) as applied in 2010, including the various instruments in place, their funding and implementation. It then provides an overview of agricultural policy reforms implemented since the beginning of the 1990s, and analyses resulting developments in the level and composition of support using the OECD indicators of support, in particular the Producer Support Estimate (PSE).
Impact of Agricultural Policy Reforms on the Economic and Environmental Performance of Agriculture This chapter aims to estimate the impact of successive CAP reforms on the agricultural sector, in particular commodity and land markets, farm structure, farmers’ income and welfare, the environment, and some aspects of rural development. Implications of CAP reforms on markets, farm income and welfare are explored using two partial equilibrium models: the OECD Policy Evaluation Model (PEM) and the Common Agricultural Policy Regionalised Impact (CAPRI) modelling system. The analysis also draws on findings discussed at the OECD Workshop on the Disaggregated Impacts of CAP Reforms, held in Paris on 10-11 March 2010.
Overall Evaluation and Future Direction This chapter evaluates the extent to which CAP reforms have followed the principles for policy reform established by agricultural Ministers in OECD countries. Several recommendations are made to improve the effectiveness and efficiency of policies to meet the objectives set for this sector in a changing environment.
References
The Integration of Environmental Concerns in European agricultural policy: A Short History Until the mid-20th century, there was perceived to be relatively little conflict between agricultural and environmental objectives in Europe other than the large scale soil erosion which has occurred, particularly in parts of the Mediterranean (Baldock and Lowe, 2000). This changed with the advent of technological transformations, which included the large scale use of inorganic fertilisers, pesticides, and the emergence of intensive livestock farms.
Annex Tables of Chapter 2
Annex Tables and Graphs of Chapter 3
Annex Tables Chapter 4
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