The Common Agricultural Policy - Coursework Example

Common Agricultural Policy al Affiliation) Who have been the winners and losers as a result of the Common Agricultural Policy? The common Agricultural policy is a link that connects the growing strategic agricultural sector and the extensively urbanized world. This partnership is a clear description of one of the most celebrated and controversial European Union policies. This policy reshapes the confidence between the agricultural sector and the European Citizenry. The motivations of this policy are based on the assumption that farming has a close association with the societal challenges, with one of the biggest challenges being that of food. The Common Agricultural policy is perhaps the biggest project that the European Union undertook1. The agriculture sector has been a priority for the union since its formation. The formation of the policy was a major scheme by France and Germany to consolidate their revenue in a bid to maintain their relevance amidst their loss in the common markets. France therefore demanded the formation of an agricultural market that aimed at protecting her farmers over opening up competition. The CAP is a 1957 establishment. The financial incentives and the heavy investments in the agricultural sector led to the massive overproduction experienced in the 1980s. This prompted the European Union to accumulate wine and butter by purchasing the surplus produce to maintain a stable market price and shield the farmers from facing grievous losses. These incentives incorporated the use of heavy machinery in the production processes, prompting the concerns of environmental degradation. Marred by continuous accusations of fraud and corruption, the early 1980s witnessed the cost of the CAP being a destabilised by the entire community. In 1992, a raft of measures replaced the guaranteed prices with a new system of direct payments that pledged compensation for farmers in case the prices of their products fell below a certain stipulation2. In addition to the price related compensations, the McSharry reforms rewarded the farmers who practiced environmentally friendly faming. In 1999, the Council seated in Berlin proposed further implementations to the CAP that replaced the subsidies of production with a scheme of direct payments that were directly connected to a food safety set of standards, environmental concerns as well as animal rights3. These reforms replace the existing schemes of direct payments with the Single Farm Payment, hence obligating the farms to produce for the benefits of the market consumption rather than for their financial gains. Later in the year 2007, the European Union launched a budgetary review process that invited all economic stakeholders to participate. This process put forward more funds to simplify and modernize the CAP, as the European Union opted to contain the global effects of the rising food prices. The policies that reformed the current CAP aim at transforming the CAP towards achieving the vision 2020 of fighting against climatic change, enhance the growth of innovative ideas, promote growth and employment while supporting the competitiveness of agriculture both ecologically and economically. The CAP operates in the previous European Economic Community, now the European Union. This single market is controlled by six sovereign nations, despite having a membership of 27 nations. The tariffs within this common market are abolished, and the prices of the products in this market are harmonised. The rule under which the CAP operates is the “community preference”. The member states of the European Union Committed themselves to the satisfaction of domestic needs using the supplies from other member states, considering the unavailability of the goods. The EU imposes trade barriers and tariffs that regulate the exports and imports with nations that are outside the common market. The European Guidance and Guarantee Fund (EAGGF) further facilitate the operation of the CAP. The fund guarantees parity for the price of a given product. In case that the product does not find a suitable buyer in the common market, the guarantee fund automatically buys the surplus by using the interventional funds. Consequentially, the prices maintain and desist from falling hence securing the farmers a decent income. In case the prices of the product rise too high, the EU sells the inventory and pushes the prices down. The major role of the EAGGF is to promote and expand production by implementing the price parity incentive. The adjustments of the parity prices by the Common Markets organizations aimed at containing the rising productivity. The operation of the CAP is similar to the European Coal and Steel community, in which every country had dialogue with the member states with the aim to steer the agricultural sector4. The products that are in the agricultural market include dairy products, fruits and vegetables, cereals, poultry, wine and pork. Apart from the challenges that the Europeans face in relation to food, the fears of exploitation of natural resources exposes the need for the respect and responsibility in the manner in which the concerns of the future generations are preserved. In addition to that, rural areas pose a challenge for the Europeans to continue the preservation of these areas in order to maintain the continuity that farming provides for the sustenance of the rural economy and preservation of the regional food basket. This prompts the need for mutual relationships between the Europeans and their farmers. The European Union champions for the improvement of the income channeled towards the support of active farmers. Besides, the commission advocates for the adjustments of the budgets to support the objective requirements of the evolving world of farming. Besides, the union seeks to protect the vulnerable farmers in a bid to equalize the farming industry, and eliminate the malpractices that hurt the small scale farming investors. The Common Agricultural Policy aims at increasing the environmental and economic competitiveness of farming by involving the use of advanced materials and instruments. The incentives that the policy puts all work to assist the European farmers to adopt farming strategies that are both sustainable and affordable. The policy further incorporates the use of responsive, modern and efficient safety nets that are fundamental in overcoming the increasing and frequent crises that Europe faces. The major aim of the program was to fulfill the desire to bring life to the countryside. These areas have been isolated by the increasing desire for white-collar jobs that force people to migrate into cities. The policy was therefore a means to lure young people to set up farming establishments, by offering them with the necessary requirements to fulfill that ambition. Beside, the policy focuses on giving additional resources that spur the innovation and research programs, by facilitating the easy transfer of skills and providing infrastructural development to enhance efficiency in the rural sector5. Therefore, as enshrined in the European Union treaty, the major objective of the Common Agricultural Policy is to increase the agricultural productivity. This solves the food problem that threatens Europeans. With increased activity on the rural areas, the overall productivity of agricultural products will rise. In this way, the union expects to ensure that the agricultural producers have a fair living standard that is desirable and admirable. Apart from increasing the agricultural productivity, the CAP has the mandate to stabilize the markets in the agricultural sector. The financial incentives imposed by the EU attract large investors into the market. These investors have the ability to manipulate the operations of the market structures, probably forming monopolies in the otherwise competitive market. The CAP protects the smaller farmers in the market from the manipulative strengths of the bigger farmer, hence maintaining the prices of products in the market. In addition to stabilization of markets, the Common Agricultural Policy assures the availability of the necessary supplies in the market6. This is both to the consumers and to producers. The CAP is responsible for managing the balance of products across all the markets, as the farmers also receive the necessary input supplies that boost the production levels. Through infrastructural developments, the EU ensures that the CAP has fulfilled the obligation to ensure availability of supplies7. The CAP sets the prevailing market prices of commodities in the market. This role also acts to ensure that the farmers maintain a stable lifestyle, and protects the small farmers from manipulation. The compensations paid out to the farmers also act as incentives to promote the production process despite the prevalence of hard economic times. Besides, the CAP encourages investment in the sector by lowering the production costs. The Common Agricultural Policy has a number of advantages. The CAP gives the Europeans food security. The global prices of food are causing economic strains to countries that do not have sufficient food in their galleries. In the absence of the CAP, the European Union could be depending on the unreliable and fluctuating imports8. The farmers also benefit from the stability that the CAP provides to them. Without the intervention of this policy, the European farmers could not invest in the subsidiary programs such as environmental conservation or focus on improved productivity or food safety. Instead, they would be focusing on maximizing their individual financial gains. The availability of food is a factor for commendation of the CAP, but the provision of food at a reasonable price is a major milestone. The rise in the effects of global warming increasingly makes the prices of food escalate. This is because the global warming affects the harvesting patterns that the farmers are accustomed to. With buying the surplus products, the CAP fund enables the 27 European countries to evade the stresses of the global warming. In addition to provision of food security, the CAP protects the rural communities. The rural communities in the European Union are under threat. Of the average EU wage, the farmers’ income is only half; hence explaining the logic behind the continuous trends in the fall of agricultural employment. This statistic indicates that Europe loses 2 percent of farmers each year to other career paths. The countryside covers 90 percent of the EU territory, with only 60 percent of the population living within the countryside. The countryside is the heritage of the European Union. It is the obligation of farmers to protect not only the way of life, but also the rural environment. Through the increasing need to conserve the heritage of the environment, the CAP offers reforms that train the farmers on increasing their production, as well as assisting the young farmers to support the start up of rural agricultural innovations. In addition, CAP increasingly orients the subsidies used in the development of rural areas by ensuring the infrastructural advancements. In the entire world, Europe prides herself as the custodian of the best foods. The CAP is a promoter of diverse and quality food substance. According to the policy, over 750 traditional and local foods enjoy protection, including an extra 2000 brands of wines and spirits. Amongst the European brands that the CAP protects include the Azores pineapples, the New market sausages, Rioja and Beaujolais. In case the CAP is abolished, the European delight of natural diet is under threat. This would lead to the introduction of the American unhealthy processes of food production. This has serious health implications. The EU is a leading promoter of producing organic food, and prides herself for the best food safety globally. The CAP is a conserver of the environment. As other parts of the world are grappling with the effects of poor environmental conservation, the EU encourages the farmers to perform agro environmental commitments9. The union pays the farmers who use environmentally conservative styles of production. The EU uses the food surpluses to assist the hunger stricken development countries. Despite this, the EU remains to be largest importer of food, further dismissing claims of protectionism. This implies that the EU is the largest importer of food from the developing countries. This is in tandem with the statistic that the EU is the second largest food exporter10. Contrary to the popular belief that the CAP is largely advantageous, the policy is infamous for wastage of resources. The CAP ignores the fundamental rules of demand and supply, hence rendering it massively wasteful. The huge investment incentives lead to overproduction, thus leading to enormous surplus production. The colossal availability of surplus in the market leads to the destruction of the products11. Besides, the dumping of the surplus in developing countries undermines the livelihoods of farmers in those nations. In the contrary, free markets, ensure the effective allocation of resources. In free markets, the farmers are liable for produce they bring into the market; therefore, they are able to use their own techniques to determine the amount of supply that they offer the free market. In addition to this, the management of the CAP consumes an estimated 700 Euros per farm. In the European Union, framers represent 5.4 percent of the entire population. Moreover, these farmers generate a paltry 1.6 percent to the Gross Domestic Product of the Union. In contrast to their contribution, farmers receive a whole 47 percent of the total European Union budget12. This is through the CAP handouts. In addition to that, the European taxpayers release an estimated 58 billion Euros in the form of subsidies to this sector that is considered relatively unproductive as well as tiny. With the current recession in the European Union countries, the economy is undergoing turbulent shocks. It is extremely illogical and senseless to dedicate search a large amount to an underproductive sector, more so in these times of economic hardship. As taunted by the pundits, the CAP is a mechanism that assists the rich to get richer. Contrary to the role that the CAP plays in stabilizing the market, the rural way of life remains to be a myth given the failure of the CAP to protect the small and vulnerable farmers. It is a worrying trend that out of the huge sum of CAP funds, eighty percent slated for aid reaches only 25 percent of the farms. Therefore, the biggest portion of the CAP aid funds directly channels to the mega farms, which are responsible for the destruction of the environment, as well as the vast agro industrial establishments. In the United Kingdom for instance, Queen Elizabeth II receives approximately 500,000 Euros each year. In addition to that, Nestle and Campina, who are giant food industries, receive hundreds of millions. This is an indication that the small-scale European farmers receive little aid courtesy of the CAP. Besides, the CAP shuts out the developing nations’ poor farmers from the elusive European market. The CAP is a strain in the pockets of many a European taxpayer. The taxpayers give out billions of money in form of subsidies to the CAP, and end up paying more when the CAP inflates the prices of food artificially. According to the supporters of the policy, the high prices indicate the opportunity cost of food security. Contrary to their belief, the existence of free trade could enables the Europeans to import plenty cheap food from the globalized world, including from China, Canada and the United States13. The CAP, by making it an excuse for registering supernormal profits, amplifies the problem of food security. Furthermore, the CAP manually shields the farmers from practicing the healthy competition practices, a behavior that hinders the evolution and modernization of the agricultural sector. The major beneficiaries of the Community Agricultural Policy are farms in the 15 older European Union members. These are farmers from France, Germany, Spain, Italy, the UK, Poland, Greece, Belgium, Ireland, Denmark, Sweden, Portugal, Netherlands, Hungary, and Finland. The newer 12 members however benefit at a smaller scale compared to their counterparts. This is because the older countries have established system of direct CAP payments in their countries. Contrary to this, the newer members take time to legislate on the appropriate procedures that are necessary for the implementation of the policy at a national level. Apart from the farmers, the national beneficiaries also determine the prevalence of the policy in the national system. During the formation of the policy14, France championed the process; this reflects the national benefits that France enjoys from the CAP, with the largest slice of 17 percent of the CAP payments15. Spain receives 13 percent whereas Germany receives 12 percent. Moreover, Italy and the United Kingdom receive 10.6 and 7 percent respectively. The biggest producer in the agricultural sector is France, producing 18 percent of the farm outputs of the EU, owing this to the favorable climatic conditions that the country has. Germany produces the second largest, with approximately 13 percent. In addition to being the second largest EU producer, Germany is the largest net contributor of the CAP financial budget. The other beneficiaries in the CAP are the nations in the EU. By locking out the participation of global countries in the local market, the revenue from the food taken by the Europeans remains amongst the countries16. The countries therefore benefit from the trade arrangements that facilitate the existence and the expansion of the European common market. The subsidies that the CAP offers to the developing countries also manipulate the prices in these countries, hence creating more profit for the European countries. The other beneficiaries of this master policy are the large landowners and big agribusiness establishments that receive money from the CAP more than the small-scale farmers do. The big investors enjoy the trade in the common market, as their smaller counterparts rely on semi modern methods of farming to produce. Moreover, these small famers rely on the small local markets to sell their produce, as the big farmers benefit from the policy. The wealthy landowners gain largely from the CAP. The British Royal Family, together with other big European aristocrats who own large tracks of inherited estates benefit from the CAP. This is according to the EU transparency report that illustrates the mismanagement of the taxpayers’ money to enrich the already rich in the society17. In conclusion, the CAP is a landmark project that has transformed the European farming sector. Despite the various challenges that face the implementation of the multinational program, it still fulfills the critical mandate that championed its formation. Europe, having the adequate food supply, is reaping the benefits of this program. Contrary to that, the program is one that rewards large investors while frustrating the efforts of several small investors18. The union should review the transparency of the CAP to with hold its sustainability. TOTAL WORD COUNT: 3,249. References Bánhegyi, G. (2015). Global Challenges and New Approaches in the Common Agricultural Policy 2014 - 2020. EU Agrarian Law, 3(2). doi:10.2478/eual-2014-0007 Bailey, A., & Suta, C. (2014). Small Farming across the EU-27. 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