Questions and Answers on the Common European Agricultural Policy (CAP)
The CAP has been one of the most important areas of European policy since the inception of European integration. The CAP has been repeatedly adjusted to take account of changes in living conditions in Europe.
You can find answers to frequently asked questions concerning the Common Agricultural Policy of the European Union here:
What is the CAP?
The abbreviation CAP stands for the European “Common Agricultural Policy”. The CAP is one of the most communitised EU policies; central requirements and the related financing of measures are decided at EU level. The reason for that has been the interest of EU Member States to shape a common policy for a sector that secures the food supply and plays a significant role in using and conserving natural resources and for the economic development of rural areas.
How did the CAP come into being?
As early as 1957, in the Treaties of Rome, the founding states of the then European Economic Community (EEC) set down the objectives and tasks of a European agricultural policy: in order to supply the people living in the ruins of post-war Europe with sufficient food, they decided to promote productivity in agriculture, to stabilise the markets and thereby to secure an appropriate standard of living for the rural community.They conferred the right to initiate common regulations to the Community in the shape of the European Commission. The states also entrusted the Community with the financing of the related measures. In 1958, the six EEC states developed the guiding principles underpinning the future Common Agricultural Policy. To achieve the objectives of the EEC treaty, it was planned to increase trade within the Community and remove barriers to trade. The aim was also to ensure fair competition between regions and avoid surpluses. Family-owned agricultural businesses were the focus of attention. Since its introduction, the Common Agricultural Policy has repeatedly been adjusted to topical challenges.
What important milestones have there been in the development of the CAP?
The introduction of the Common Agricultural Policy has not stopped the profound structural change that has taken place in agriculture over the past decades: the number of agricultural holdings has greatly declined while the remaining enterprises have become bigger and more productive.As EU surpluses were accumulating and agricultural expenditure was rising significantly – in the 1980s, up to 70 percent of the EU budget was spent on agriculture –, the CAP made a paradigm shift: with the agricultural reform in 1992, it turned away from market and price support and prioritised direct aid for agricultural holdings. Support prices for cereals, for instance, were reduced and arable land set aside. Farmers received direct payments as compensation. In addition, support measures such as extensification or afforestation in the area of agricultural structural policy were introduced. This was the first time that environmental concerns found their way into the CAP on a larger scale. The agricultural policy reforms were continued with the Agenda 2000: support prices were reduced again, whereas direct payments were increased. A further new environmental aspect was added: in future, Member States could make direct payments conditional on compliance with environmental rules. There was also an increasing focus on rural areas: questions concerning agricultural structural policy were included in a much more comprehensive manner with the so-called 2nd pillar for “rural development support”. Eventually, in 2003, the EU started to decouple direct payments from production. The concept of environmental protection and animal welfare was further strengthened: those who wanted to receive the direct payments in full had to comply with certain conditions (so-called cross-compliance). Finally, from 2014, the market-orientated course was continued and the CAP was geared even more strongly towards rewarding services to society. With the so-called greening, farmers were obliged to provide additional environmental services. At the same time, the CAP continues to provide the farming community with a security net in the case of market risks, such as recently in view of the milk crisis in 2016.
How much money is available under the CAP?
Total annual funds of around 6.2 billion euros in Community resources will be available for agricultural support in Germany from 2014 to 2020. EU support funds are divided across two pillars.
- The first pillar finances the direct payments to farmers. To this end, from 2014 to 2020, Germany receives about 4.85 million euro per year from the EU.Direct payments to farmers are granted per hectare of farmland, if certain conditions are fulfilled. For example, certain standards (so-called “cross compliance”) must be explicitly observed. On average, these payments make up around 40 percent of the farms’ income. They are vital to sustain the livelihoods of small and medium-sized farms to support the cultivation of less-favoured areas.30 percent of the funds for direct payments are – within the scope of the so-called “Greening” – subject to the farmers complying with certain conditions on crop diversification, on the maintenance of permanent grassland and on ecological focus areas with agricultural practices that are particularly beneficial to climate stewardship and environmental protection.
- The second pillar comprises specific aid programmes for sustainable and environmentally sound farming and rural development. These include, inter alia, agri-environmental programmes and the support of organic farming. Under the second pillar, Germany has around EUR 1.3 billion in EU funds at its disposal per year which must be co-financed with national funds.
Who benefits from the CAP?
All citizens in Germany and elsewhere in the European Union benefit from the CAP. On the one hand, it enables the agricultural sector to provide a reliable supply of high-quality and nutritious food at affordable prices. On the other hand, it remunerates farmers for the services they provide to the general public, such as the conservation and maintenance of cultivated landscapes. Farmers shape the social fabric of villages and create income and job opportunities in rural areas.The second pillar of the CAP supports people living in rural areas in keeping their region attractive and strengthening the economic power of rural regions. Examples include, for instance, support for tourist services at farms, farm shops, local village renewal projects or the elaboration of regional development strategies and civic commitment. The main support instrument for the development of rural areas is the European Agricultural Rural Development Fund (EAFRD). In addition to that, the CAP remunerates services for the conservation and protection of the environment in all parts of Germany that farmers provide as so-called voluntary agri-environment-climate measures. These include, for example, extensification measures, organic farming or the promotion of areas with natural constraints. For farmers, the state aid is in turn a compensation for the fact that European farmers have to meet far higher standards in the fields of environmental, animal and consumer protection than many of their colleagues in other parts of the world. These higher standards raise the cost of production in many cases and may be a competitive disadvantage in a globalised market. Support seeks to offset this disadvantage and ensures high product safety and high quality. Direct payments under the CAP help to safeguard and stabilise farmers’ incomes by cushioning the impact of price fluctuations for agricultural products, which in some cases can be extreme.
Why is the CAP currently under discussion?
The 2021-2027 Multiannual Financial Framework (MFR) is currently being negotiated in the European Union. It sets down the annual maximum amounts the Union may spend in the individual policy areas during this time period. The agricultural budget, which is crucial for the future shape of the CAP, will also be discussed within the context of these negotiations. The discussion will address an increased focus on results, greater reward for services to society, in particular concerning climate action, environmental protection and nature conservation, and a fundamental simplification of the CAP.
What does the EU Commission propose for the post-2020 CAP?
On 1 June 2018, the European Commission presented a legislative package with proposals for the post-2020 CAP. It includes
- a proposal for a regulation on the CAP strategic plans;
- a proposal for a regulation on financing, managing and monitoring the CAP; and
- a proposal for a regulation on a Common Market Organisation (CMO) for agricultural products.
- What does the EU Commission propose for the post-2020 CAP?
The European Commission’s proposals are currently being thoroughly analysed and evaluated. The key proposals include the following aspects:
- the so-called two-pillar model should be maintained. Under the 1st pillar, direct payments to farmers should be retained as a vital element of income support. Under the 2nd pillar, Member States should continue to have the possibility of setting up targeted support programmes.
- The Commission proposes incorporating a degression, i.e. an area-dependent staggering of direct payments, starting from 60,000 euro per year, and a cap from 100,000 euro.
- The Commission proposes further harmonising the size of direct payments between the Member States (so-called external convergence).
- Services rendered by the agricultural sector for the environment and climate should be supported even more comprehensively. In particular, the receipt of direct payments should be more closely linked to compliance with environmental and climate regulations (so-called conditionality).
- The agricultural sector of the European Union should be more closely aligned with societal expectations regarding food and health.
- The subsidiarity principle should be reflected even more strongly in the new delivery model than it is today. The EU should merely set the framework, which should then be fleshed out by the Member States.
- The Member States can earmark funds for the support of research and knowledge transfer. The potential of digital technologies should be exploited, particularly in order to ensure sustainable farming and security of supply.
Please click here to go to a press release on this subject issued by the Commission on 1 June 2018.