The Common agricultural policy or, CAP as it’s known, is the EU’s main farming subsidies scheme.
It aims to ensure a standard of living for European farmers,
and a stable supply of affordable food for European citizens.
So, what does that have to do with non-EU countries? Let’s find out together.
Just like with every EU policy, the CAP has an impact on third countries.
Here’s a simple example.
The CAP reform under discussion is made up of three regulations:
one on the CAP strategic plans, one on the horizontal regulation
and one about the common organization of agricultural markets.
The latter is an important portion of the entire CAP as it governs the production and trading
of agricultural products in the European Union, including food of both animal and plant origin.
You probably remember the debate over the veggie burger, whether to allow plant-based foodstuffs being labelled with ‘meatish’ names.
Well, that’s regulated by the CMO.
So, when we talk about the CMO we’re talking about trade rules for all agriculture products marketed in Europe,
and of course, this affects also producers from third countries who want to place products in the world’s biggest market for food products.
And that means that what is decided can actually have an impact on producers abroad
who are currently straining their ears to hear what’s happening in the CAP reform negotiations.
So, we have these rules regulating access to the EU market,
but historically the main issue that 3rd countries have had with CAP was about the previous subsidy export system.
This is the system that the EU used in the past to subsidise export of its agricultural products to regulate market prices on its domestic market.
This was a policy instruments used a lot in the late 1980s and early 1990s,
and this affected not only third country producers, but also European taxpayers as well.
At the peak of its use, this policy cost around €10 billion per year.
The EU then looked to reduce the use of this policy and since the CAP reform in 2013 it was no longer offered as a tool in the CAP toolbox.
And actually, the EU is globally at the forefront of efforts to stop export subsidies.
For instance, the Commission advocates for a limit on trade-distorting farm subsidies and agricultural domestic support in general at the WTO level.
Export subsidies may be gone, but the backbone of CAP, namely the direct payments, remain controversial for non-EU countries.
The US in particular has a bone of contention with these direct subsidies
as the EU spends three times as much as the US on farm subsidies per year.
In some EU countries, like France, they continue to account for up to 50% of farmers income.
The main problem with direct payments is that they can create a market distortion at the global level.
And the main criticism is that somehow the CAP is still subsidizing EU exports with direct payments
simply because in other places of the world government subsidies are not as high,
and that makes those sectors less competitive compared to the EU products.
This is problematic in places where EU products have a huge market, like in West Africa, where EU products account for about 50% of imports.
So in this case, the risk is a knock-on effect not dissimilar to dumping,
as local products cannot compete against subsidised goods from the EU.
There was a study commissioned by the Committee of Regions in 2019 which analysed 4 products,
milk powders, frozen poultry, onions, and tomato paste in developing countries.
And the report found that the extent to which CAP subsidies have influenced the price of selected EU exports to these markets
is limited but not negligible for milk powders, non-existent for chicken meat, and not significant for tomato paste.
And lastly, another study published in May 2020 on the impacts on trade with Africa
criticised the fact that direct payments are still high while the EU spending on agricultural development in Africa is comparatively small.
So this created a disproportion between the aids to rural farmers in Africa and rural farmers in Europe.