European Studies Essay

5554 words - 22 pages

Discuss the relative merits/demerits of an agricultural policy

oriented to price reform rather than one based upon structural


"The common market shall extend to agriculture and trade in agricultural

products. 'Agricultural products' means the products of the soil, of

stock-farming and of fisheries and products of first-stage processing

directly related to these products....The operation and development of the

common market for agricultural products must be accompanied by the

establishment of a common agricultural policy among the Member States" (1)

>From the beginning of the European Union, EU policy has given emphasis to

the agricultural sector. To this end, a Common Agricultural Policy (CAP)

was established in 1963. (2) Provisions for this policy were made in the

Treaty of Rome. The aims of this policy were to increase agricultural

productivity, to ensure a fair standard of living for the agricultural

community, to stabilise markets and to ensure reasonable prices for the

consumer. (3) This is unusual in the context of the Treaty of Rome which

provided for free trade and movement of resources. Agriculture was

ill-adapted for this approach. Protection was given, not only by customs

duties, but also by a variety of agricultural policies. This essay will

discuss the merits and demerits of a the pre-1992 CAP with its emphasis on

price reform, in comparison with the post-1992 CAP which was oriented to

structural reform.

It cannot be denied that there were merits of the pre-1992 price reform

policy. There was a bountiful food supply with an increased variety and

quantity of food. Farmer's yields increased, particularly the large

farmers. Producers were protected from the external market due to community

preference and, therefore, domestic agriculture could develop. There were

also spin offs in food production. Although some of the policies created

good returns for farmers, the demerits of said policies far outweighed any

advantages they had. The core-periphery divide was widened, quantity became

more important than quality and consumers had to pay higher prices.

Agricultural practices caused damage to the environment and international

trading relations were strained.

Until 1993 the EU rarely supported farmers by paying them direct subsidies

from the taxpayers. (4) Instead the 30 billion ECU (and often more) was

spent in the buying up of surplus commodities at minimum official prices

and was also used to pay subsidies to traders to sell surpluses on the

lower-priced world markets. (5) During the 1960's the price system was

devised. The first problem with price policies is that of fluctuating and

differing exchange rates. "Green Money" was the first solution to be

developed to counter the problem of differing exchange rates. This,

however, could be manipulated by politicians to achieve different price

levels in the member states than those indicated by the common price...

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