Common Agricultural Policy (CAP) Flashcards
Why was CAP controversial - began in 1963
Took a large % of budget expenditure
High prices for EU consumers
RoW negatively impacted
Original CAP harmed the environment
Policies before EEC
UK deficiency payment scheme
CAP principles (3)
Community preference i.e buy EU food
Free trade (in EEC)
Shared financial responsibility
Main objectives of CAP (5)
Raise productivity
Fair standard of living for workers
Stabilise markets
Assure supplies
Reasonable prices for consumers
Issues with these iobjecives
Contradictory and vague e.g to have higher wages, difficult to have low prices
Problems in agriculture
Cobwebs theory - time lags e.g if wheat price high now, it takes time to grow, by then price may have dropped
Inelasticity of demand creates price instability - if demand inelastic, a change in supply will lead to larger change in price.
What mechanism did CAP operate
Price support mechanism
Price support mechanism
Based on price in area of shortest supply - to find a target price (Ptarg)
So it’ll be high!
Price support mechanism diagram
Threshold price (Pth)
Aim of a threshold price
Aim is to ensure imports do not flood into the EU
Variable levy (VL)
Pth - Lowest world price
Why did it upset rest of world
If world price fell, they’d just increase the levy
Good revenue source for EU
Intervention price (Pinv )
Minimum price - based on the place with the most supply
Export subsidy
Give producers the difference to allow them to undercut world prices. Dump the surplus food on world markets if they choose not to store
Pinv-Pw
(Once again RoW complain)
Different terminology names on pg 16 (function is still the same)
