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E uropean Common policies Prepared by Dr. Endre Domonkos (PhD)

E uropean Common policies Prepared by Dr. Endre Domonkos (PhD) 2013/2014. Academic Year , Spring Semester. I. Reasons for establishing the Common Agricultural Policy I. Agricultural policy: key element in every country’s economic policy .

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E uropean Common policies Prepared by Dr. Endre Domonkos (PhD)

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  1. European Common policiesPrepared by Dr. Endre Domonkos (PhD) 2013/2014. Academic Year, Spring Semester

  2. I. Reasons for establishing the Common Agricultural Policy I. • Agricultural policy: key element in every country’s economic policy. • The founding Members of the EEC wanted to introduce agriculture into the common market. • Common Agricultural Policy (CAP): unique, specific domain within the common market. • Position of France: • Germany: gaining new markets for its manufactured products. • European agriculture: protection against the overseas rivals.

  3. I. Reasons for establishing the Common Agricultural Policy II. • The Common Agricultural Policy (CAP) was established separately from other Community activities as a special area of the common market. • Article 39 of the Treaty of Rome: objectives of the CAP - to increase agricultural productivity; - to ensure a fair standard of living; - to stabilise markets; - to assure availability of supplies; - to ensure that supplies reach consumers at reasonable prices.

  4. I. Reasons for establishing the Common Agricultural Policy III. • The principles of the CAP: - the principle of the unified market: - the principle of Community preference: - the principle of financial solidarity:

  5. I. Reasons for establishing the Common Agricultural Policy IV. • Common Agricultural Policy was launched in 1962 and a common agricultural market was established by 1967. • A protective mechanism was also created. • European Agricultural Guidance and Guarantee Fund (EAGFF): to finance the CAP • The Guarantee Section of the EAGFF: • The Guidance Section: • Common Agricultural Policy: true common policy

  6. II. The functioning of the Common Agricultural Policy • Price advantages to EU agricultural products over imported products. • Under the CAP, Community agricultural products were assigned unified wholesale prices (limit or threshold prices), which were based on the product prices of the Less-Favoured Areas. • These prices significantly exceeded world market prices. • Agricultural levies: established by the Commission. • Purchase intervention: • Excessive surplus + export subsidies from the Community.

  7. III. The achieved results of the Common Agricultural Policy • Achieved results: better agricultural production and productivity + supplies made the Community self-sufficient. • Problems: subsidy of the system of the CAP (imbalances) + guaranteed intervention prices did not encourage productivity but production. • Problems with the over-production and the maintenance of the system + distortion of the agricultural world market. • At the end of the eighties the reform of CAP seemed inevitable.

  8. IV. The 1992 CAP reform I. • In 1968: Sicco Mansholt’s proposal on the modernisation of the Community’s agricultural structure. • In the 1980’s a guarantee threshold was introduced for several products • In 1984, at the Fontainebleau Summit: Introduction of milk quotas. • Delors I. Package: reforming the financial mechanism of the CAP.

  9. IV. The 1992 CAP reform II. • In 1992 the so called-McSharry Plan was adopted by the Council. • Main elements of the reform were the followings: • Guaranteed Community prices were decreased • Direct payments in the cereal sector • Environmental protection became a dominant role. • Early retirement schemes were provided to elderly producers. • Preservation of natural and cultural heritage as an objective of the agriculture.

  10. IV. The 1992 CAP reform III. • The results of the CAP-reform: • The main objective of the McSharry reform was the gradual move away from reliance on price support towards income support based on direct payments. • Introduction of direct payments: gradual process. • Positive changes within the agricultural support policy of theUnion. • Reasons for reforming of CAP: Liberalisation of the world market + forthcoming accession of the Central and Eastern European countries.

  11. V. Agricultural provisions of AGENDA 2000 • Reasons for the further reforms of CAP: WTO-obligations + Eastward enlargement. • The European Commission set the primary objectives of the CAP reform. • Objectives of AGENDA 2000 in the field of agricultural policy: • It reduced price subsidies: • Promotion of rural development:

  12. VI. Eastern enlargement and the Common Agricultural Policy I. • Problems occurred by the CAP reform of Agenda 2000: - the reform didn’t fully comply with the Union’s obligations assumed in the framework of the WTO to sharply reduce agricultural support; - problems with the eastward enlargement - the uncertainty of the number of candidate countries. - the extension of direct payments to the new Member States. • But candidate countries insisted on direct payments (equal competition).

  13. VI. Eastern enlargement and the Common Agricultural Policy II. • Net contributors (primarily Germany) expected a new CAP reform to reduce their contributions to the budget. • Net contributors: they didn’t want to pay more into the common budget and insisted on completing reforms prior to enlargement. • October 2002: Member States reached a political agreement on the long-term financing ceilings of the CAP. • Agreement was reached that, until 2006 the ceilings of AGENDA 2000 would apply and from 2007, CAP spending could gradually increase by not more than 1% a year.

  14. VI. Eastern enlargement and the Common Agricultural Policy III. • Farm subsidy package to the Central and Eastern European countries. • Elements of the Package: market regulatory mechanisms (price support, export subsidies) would apply to farmers from new Member States from day one of membership + direct payments to them would be phased in gradually. • Gradual phasing of direct payments to farmers in the new Member States over a period of nine years, to reach the full 100% level in 2013. • Final package adopted at the Copenhagen European Council of 12-13 December 2002:

  15. VI. Eastern enlargement and the Common Agricultural Policy IV. • From 2007, on direct payments grow by 10% each year, but national top-ups can come exclusively from the national budget. • Between 2004 and 2006 EUR 5.11 billion was granted for rural development aid to the new Member States joined in the EU in 2004. • The case of Bulgaria and Romania: • Additional top-up payments of up to 30%.

  16. VII. The agricultural reform of 2003 I. • The negotiations on CAP reforms focused on the following priorities: • In June 2003 agreement was reached on reforming the CAP. • Key elements of the 2003 reform package were the followings: - a single farm payment system based on partial decoupling of production and subsidies: - reduction in direct payments: - compliance with Union standards: - strengthening rural development:

  17. VII. The agricultural reform of 2003 II. • The implementation of the reforms and of the decoupling of production and direct payments started on 1 January 2005. • Possibility to maintain the old system of payments for a transitional period of two years by the Member States. • The new system became compulsory from 1 January 2007. • Exception in the case of new Member States: • Deficiencies of the 2003 reform package: • Financial discipline mechanism: from 2007, direct subsidy payment ceilings would not be exceeded.

  18. VII. The agricultural reform of 2003 III. • The Commission continued the 2003 comprehensive CAP reform by supplementing it with sectoral reform packages. • The new sugar market regime came into effect in July 2006. • Agreement was reached in June 2007 on the new common market organisation for fruit and vegetables. • Agreement was reached in the Council in June 2007 on replacing the 21 individual sectoral common market organisations with a single common market organisation framework.

  19. VIII. The Common Agricultural Policy from 2007 to 2013 I. • Budgetary ceiling was adopted in October 2002. • The ratio of agricultural expenditure was further reduced in the budget from 46.4% to 36.5% between 2007 and 2013. • Farm spending remained unchanged in nominal terms. • The Commission’s proposal: reinforcement of rural development within the new budgetary heading of natural resources. • The 2007-2013 Financial Perspective was adopted by the Member States in December 2005 (approval by the EP in May 2006).

  20. VIII. The Common Agricultural Policy from 2007 to 2013 II. • Reduction in CAP market support measures + direct payments from EUR 301 billion to 293 billion. • Much higher share of rural development policy (EUR 69.25 billion) in the budget. • Review clause: review of both revenue and expenditure side of the budget halfway through the financial period. • Reforms of the CAP: it depends of the standpoints of the Member States.

  21. VIII. The Common Agricultural Policy from 2007 to 2013 III. • The new Financial Perspective brought a new framework for the CAP from 2007. • European Agricultural Guidance and Guarantee Fund (EAGGF) was split in two and CAP is financed from two funds. • European Agricultural Guarantee Fund (EAGF): • European Agricultural Fund for Rural Development (EARFD):

  22. IX. The Common Fisheries Policy I. • Common Fisheries Policy (CFP): established in the Treaty of Rome. • It started to operate in the 1970s. • The entire system of this common policy was completed by 1983. • Four important elements of the common fisheries policy: 1. Conservation of fish stocks; 2. Common organisation of the markets; 3. Structural measures; 4. Agreements concluded with third countries.

  23. IX. The Common Fisheries Policy II. 1. In order to sustain fish stocks, EU Member States laid down rules for the total allowable catches. 2. The common organisation of the fisheries market: four instruments: (a) establishing common market standards, (b) setting up producers’ organisations (c) introducing a price support system based on intervention mechanisms and (d) constructing a trade regime with non-member countries. 3. Structural measures: 4. Since 1976, fishing agreements with third countries are concluded by the Community on behalf of the Member States.

  24. IX. The Common Fisheries Policy III. • Decision-making in the area of fisheries policy: ordinary legislative procedure is applied. • Structural policy for fisheries: modernising the sector, promoting structural changes and development of fisheries-dependent areas. • In 1993, Financial Instrument of Fisheries Guidance (FIFG) was set up. • Within the framework of AGENDA 2000, the FIFG’s budget amounted to 1,1 billion for the period 2000-2006.

  25. IX. The Common Fisheries Policy IV. • Reform measures of the Common Fisheries Policy (in 2002) • 4 elements: 1. Long-term approach: • New fleet policy: • Better application of the rules: • Stakeholder involvement:

  26. IX. The Common Fisheries Policy V. • From 1 January 2007, fisheries policy is financed from a European Fisheries Fund (EFF). • EUR 3.85 billion between 2007 and 2013 for the following objectives: 1. matching fleet capacity to available fishery resources; 2. support to certain industries (aquaculture, processing, marketing); 3. support measures of benefit to the entire sector; 4. sustainable development of areas dependent on fisheries; 5. technical assistance to Member States.

  27. X. Agriculture and fisheries under the TFEU • Agriculture and fisheries: shared competences of the Member States and the Union. • Agricultural and fisheries policy: PART THREE TITLE III of the TFEU. • Fisheries policy is now referred to in the Treaty- • Extension of internal market to agriculture as well as to fisheries. • Implementing measures are adopted by ordinary legislative procedure.

  28. XI. Novelties in the agricultural policy • The Health Check of the CAP. • The Europe 2020 strategy offers a new perspective. • On 12 April 2010: public debate on the Common Agricultural Policy’s future, objectives, principles. • The contribution of CAP to Europe 2020 Strategy. • “Communication on the CAP towards 2020”. • On 12 October 2011 the Commission presented a set of legal proposals.

  29. XII. Novelties in the agricultural policy -Zoltán Horváth (2011): Handbook on the European Union, Hungarian National Assembly, Third Edition, Chapter 10., The Common Agricultural Policy and the Common Fisheries Policy, Hvgorac, pp. 345-373. - Zoltán Horváth – Bálint Ódor (2010): The Union after Lisbon. The Treaty Reform of the EU, hvgorac, Chapter 8., The Union’s policies, pp. 252 - European Commission Agriculture and Rural Development. In: http://ec.europa.eu/agriculture/cap-post-2013/index_en.htm Downloaded on 26 February 2012.

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