8.2 CAP Reforms Flashcards
What were the MacSharry reforms?
Objectives:
- Limit production, move towards competitive agricultural markets
- Need to reach agreement with trade partners at GATT
How:
Market support reduced for some products and farmers compensated by direct grants:
- Direct payments on current production
- Diversification grants: money paid to use land for other things e.g. trees, fruit, garden centres, fishing, B&Bs
Did they work?
- Reduced market prices and stockpiles
Enabled WTO Uruguary round trade deal to be struck:
- Controlled export subsidy use
- Direct payments allowed
However:
- Increased budget cost of 10 million euros
- Payments are still distorted
- Almost neutral on farm incomes: big farms get the most
What were the Fischer Reforms?
2003:
- Reduction of market price support - “bribe farmers” - prices became 4% over world prices
- Decoupling of direct support by creation of Single Payment Scheme (SPS)
- Mandatory ‘cross compliance’ rules
- Rural development by direct payments - also possibility to reduce direct payments in case of budget pressures
What were the effects of decoupling the CAP?
Page 3 graphed
Cap price-cut-reform
Cut prices down to world price, gain in consumer surplus, loss in producer surplus
Cap price-cut-reform and compensate reform:
Producer loss shift to taxpayers
- Rise in consumer surplus
- NO loss in produer surplus
- Tax payers gain b+c+d but give producers a+b+c
- Overall gain of b+d
Who are opponents to CAP?
Payments to farm owners, not to farmers (40% of EU farmland is not farmed by the owner)
Skewed payments - in UK 25% of the money goes to 39 recipients
Everyone has to pay for CAP, including poor countries - EU budget financed by a flat tax. Member contributions are about 1% of GDP regardless of national incomes
The Queen, Princes and Dukes, including a Saudi Prince are among recipients from CAP subsidies - between £130-300k
MNEs get more than the Royal family:
- Tate and Lyle (sugar MNE) - 180 million euros
- Nestle - 30 million euros
What were the goals of the 2015-20 reforms? What was the reform?
Fairer distribution of direct payment among member countries, regions and farmers
- Increased competitiveness
The reform:
- Keep EU farm spending level in nominal terms until 2020. Reduction in real terms if positive inflation
- No member state farmers should receive less than 65% of EU average
-End sugar production quotas
- Greening: 30% of direct payments based on environmental criteria
- being ‘active farmer’ - current payment system based on land area and subsidy levels
- Farmers under 40 a top up of 25%
What were the consequences in 2015-20 reforms?
Biggest farms may lose up to 30% incomes
- Money redistributed to help small farms
- Cap at 300,000 euros not successful
Improvements in environmental issues
- However environmental groups complained improvement on standards were small
WHat is British Agricultural policy?
Departed from CAP
- CAP subsidies around 50-60% farm income
- Until 2020, level of support same than with CAP
- From 2021 to 2024, transition plan to reduce un targeted direct payments and increase payments based on environmental land management and sustainable farming
After leaving CAP, some sectors likely to be negatively affected (unless there is government intervention)
How is British Agricultural Policy responding to Climate Change?
Effect on Climate Change:
Before Trade and Cooperation deal, concerns about declining climate policy - around 80% of policy came from EU
- Government argued not be decrease in standards after Brexit - UK commited to reducing economy wide GHG emissions by at least 68% by 2030 (compared to 1990)
Ambition of achieving economy wide climate enutrality by 2050, although not clear how standards snd targets will be enforced
New UK emissions trading scheme - set total amount of GHGs emitted by installations covered by the system
Companies can trade allowances, and buy international credits from emission-saving projects around the world
- After each year country must have enough allowances to cover all emissions, otherwise they are heavily fined - if company reduces emissions, can keep spare allowances to sell or cover future needs
- Over time amount allowed is reduced to reduce emissions over time
Why is agricultural policy key for environmental protection? What are some retaining issues
Agricultural policy key to provide incentives for farmers to re-forestation
Zero imported CO2 - may reduce production of CO2, but if it imports from countries with heavy emissions the next effect is still there
- E.g. trade diversion from EU countries with less regulations may have negative net emission effects
