Common Agricultural Policy

The Common Agricultural Policy (CAP) has been an integral part of the European Union (EU) since its foundation as the European Economic Community in 1958. All of the founding member states had national policies to support agriculture designed to promote greater food self-sufficiency and to modernize a farming sector characterized by small farms and backward technology. One of the significant achievements of the EU was to create a single, integrated market for agricultural products, with a common price level and support arrangements during the following decade, so that by 1968 agricultural products were traded freely without trade barriers between the original member states.

The CAP has two main elements. The most important component is its market-management policies intended to stabilize and raise farm prices in order to support farm incomes. The other element has been its structural policy under which payments are made to encourage the modernization of farming and the food-processing industry. The price-support element has dominated CAP expenditure for much of its existence. Recent reforms have put greater emphasis on supporting rural development, and this "second pillar" of the CAP is now attracting greater budget resources than before.

Success in establishing the CAP came at a price. In order to secure the agreement of the original member states to merge their national policies, agricultural prices within the EU were and are supported at levels much higher than world prices. The high prices, combined with the accelerated modernization of farming, encouraged the overproduction of food. This caused struggles to control the budget costs of the CAP during the 1980s, and ultimately led to reforms that reduced farm prices, compensated farmers by increased direct payments, and limited production volumes.

Irish farming benefited from access to other EU country markets and from the high support prices guaranteed by the CAP. EU agricultural subsidies contributed to the growing prosperity of rural Ireland in the period of EU membership and helped to maintain larger numbers of farmers on the land than otherwise would have been possible. But the high dependence on subsidies means that Irish agriculture is vulnerable to any changes in this policy. Farm incomes in enterprises such as cattle and sheep production are now completely dependent on the continuation of EU payments. The way in which the CAP adjusts to the challenges of absorbing the countries of central and eastern Europe and to further agricultural-trade liberalization under the auspices of the World Trade Organization will be crucial for the future of Irish farming.

Common Agricultural Policy

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