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New developments affecting the shape of the common agricultural policy.

Niemi and Kola maintain that the Common Agricultural Policy (CAP) of the EU is not the most efficient means of addressing an increasing number of policy objectives. The logic of remunerating the multifunctional role of agriculture calls for better consideration of factors like the rural territory, the environment, the landscape, rural communities and rural employment. Renationalization implies a shift of competence back from EU institutions to national ones. The CAP of the EU represents a concentrated, supranational decision making. International economic integration can be defined as a state of affairs or a process which involves the amalgamation of separate economies into larger free trade regions. "Concerning the structural funds and regional policy of the EU, they have better reasons and goals than the CAP as they contribute positively to the more balanced economic development in the EU by helping poorer, remote regions. The CAP often does just the opposite, as (according to the notorious rule) 20 % of farmers of the best agricultural regions receive 80 % of CAP subsidies. Common regional policy serves at least some of the defined purposes of economic integration; the common agricultural policy does not. Renationalization should seriously be considered in this kind of situation and conditions." (1) Niemi and Kola claim that spending on the CAP has been the main component of the EU budget for many years. Member states know that the more they produce internally the more they internalize the financial flows of the CAP. Macroeconomic policy for ensuring economic stability is implemented at the national level. The CAP as a whole has become very complex and bureaucratic, and some of its methods of governance rather obsolete. "Moving policies back from the EU institutions to the national level is politically very sensitive, however. Advocates of the traditional approach suggest that increasing Member States' influence could turn out to be a dangerous path unless the EU institutions are given sufficient powers to ensure that basic principles of the CAP are not put at risk. Supporters of the gradual renationalization, however, believe in a streamlined, political Commission with fewer managerial functions, and the creation of a raft of semi-autonomous bodies to deal with the finer details of day-today policymaking." (2)

Koning notes that, in 2005, the Economic Union of West African States (ECOWAS) decided to create a common agricultural policy (ECOWAP). The EU is pressuring the ECOWAS countries to open their markets within the context of a European Partnership Agreement. Koning surveys the history of the common agricultural policy of the EU so that farmers and policy makers of the ECOWAS can draw their own conclusions. To understand the farm policy of the EU one has to start with the origins of agricultural protection in Europe. Once a country produced more than its domestic consumption, it was left with a surplus that could only be disposed of in the world market. "The new fall in agricultural prices in the 1920s-30s was coupled to a great depression that squeezed the domestic demand for farm products. As a consequence, several countries were left with increased surpluses that they could no longer sell in their own markets. The fall in world market prices also raised the costs of dumping these surpluses, the more so because dumping itself drove world market prices down even further. To moderate the resulting cost increase, several countries introduced supply management to reduce their export surpluses. Thus France controlled the production of wheat, and the Netherlands that of livestock and vegetables. On the other side of the ocean, the US did the same with cotton and tobacco." (3) Koning says that the EU simply harmonized and integrated the existing farm policies of its member countries. The implementation of structural policies lagged behind that of price policies. a basic flaw of the common agricultural policy was the lack of supply management. The common agricultural policy included no effective instrument for supply management. The introduction of a similar policy in cereals was impeded by the grain trade and a minority of big grain farmers. The EU is trying to use European Partnership Agreements to make ACP countries open their markets for its surpluses. "The EU has made a serious error of judgment. Direct payments support is more expensive for governments than price support, which is largely paid for by the consumers. Therefore, direct payments support is only feasible for countries with rich treasuries where farmers are no longer more than 2 or 3 percent of the population. The US is such a country and Western Europe too, but in 2004 the EU was enlarged by ten Eastern European countries where small farmers are a significant part of the population. EU politicians had thought that direct payments could be withheld from Eastern European farmers by reforming the common agricultural policy before East European countries joined the Union. East European farmers would then have no right to direct payments, because these were a compensation for the reduction of supported prices that they had never had." (4)

Kryn states that the Common Agricultural Policy is the largest area of EU expenditure. The political interests are extremely important when it comes to the making of and the reform of the CAP. As agricultural production stabilized and Europe became a net exporter of agricultural goods, the CAP price-support mechanism created problems. The EU has been able to sustain the CAP thanks to the consumers and taxpayers who have paid to maintain the policy. "The process of EU integration appears to offer great opportunities, but also significant threats to Polish agriculture. There will be access to the EU market, the expansion of the agro-food sector, and the availability of free capital flow and financial support. At the same time, there will be enormous costs of adaptation and of modernization of the sector in order to meet the conditions for operating in the EU and minimize the gap in the level of development between Polish agriculture and the more modernized agro-food sector in the EU. People talk increasingly of two Polands, urban and rural. In fact, there are more than two because the countryside itself is divided. In the north and the west, large former state farms are holding their own." (5) Rudloff points out that the EU agricultural budget in the framework of the Financial Perspective 2007-2013 will exert further pressure for reform of the Common Agricultural Policy. Simulation results on sustainability of the EU agricultural budget reveal the necessity for future agricultural reform. The European Union's Common Agricultural Policy (CAP) was defined as part of the Common Market back in 1957 in the Treaty of Rome establishing the European Economic Community (EEC). Since its inception, the CAP has had a crucial impact on the EU budget, in terms of both revenues and expenditures. Income-supporting price instruments led to comparatively high EU prices relative to the world market. The share of agricultural spending in the total budget has always been high. "The funds that flow back to each individual member state from the agricultural budget are determined by the production-related character of the expenditures. Since the amount of key agricultural expenditures was defined product-specifically (e.g. intervention prices and direct payments), the flowback from the agricultural budget under the first pillar to a member state depends on that country's internal production structure. The funds for the second pillar are distributed according to set criteria characterising the importance of the rural area (proportion of agricultural land, relevance of the farm sector for employment etc.)." (6) Rudloff concludes that the budgetary benefit from the CAP influences countries' fundamental attitude to agricultural policy reform. Nobuhiro emphasizes that agriculture in Northeast Asian countries, including Japan, Korea, and China, has several common characteristics such as small-scale rice farming: it is important for these countries to jointly establish an international food trade rule which enables their agricultural sustainability in the future against the severe free trade pressure from exporting countries with large-scale farms. Forming a Northeast Asian Free Trade Area is a way to strengthen cooperative relationships among these countries. Nobuhiro asserts that there are huge differences in agricultural productivity among these countries: we should seek possibilities of a common agricultural policy that adjusts imbalance of FTA gains among the countries by creating a common fund collected in proportion to the GDP level of each country just like the EU budget. (7)

REFERENCES

(1.) Niemi, J. * Kola, J., "Renationalization of the Common Agricultural Policy: Mission Impossible?", in International Food and Agribusiness Management Review, 8 (4), 2005 p. 26.

(2.) Ibid., p. 34.

(3.) Koning, N., "Agriculture, Development and International Trade: Lessons to be Learned from the Common Agricultural Policy of the European Union", paper at the Forum on Food Sovereignty, Niamey, 7-10 November 2006, p. 5.

(4.) Ibid., p. 9.

(5.) Kryn, J., "A United Front: European Union Enlargement, the Common Agricultural Policy, and Polish Agriculture", CIPE RWP, June 2003, p. 5.

(6.) Rudloff, B., "New Budget Priorities for the Common Agricultural Policy", DBR RWP, November 30, 2006, p. 9.

(7.) Nobuhiro, S., "Possibility of a Northeast Asian Common Agricultural Policy", in Noringyo Mondai Kenkyu, 41 (4), 2006, pp. 365-372.

IOANA ZAHARIA

NICOLAE TUDORESCU

CONSTANTIN ZAHARIA

University of Craiova
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Author:Zaharia, Ioana; Tudorescu, Nicolae; Zaharia, Constantin
Publication:Linguistic and Philosophical Investigations
Date:Jan 1, 2009
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