How are the problems of reforming the EU’s Common Agricultural Policy linked to the problems of enlargement

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The European Union (EU) is currently faced with what could perhaps be described as one of the greatest challenges it has faced in its history, that of expansion into Central and Eastern Europe to take in up to ten applicant countries (and Cyprus) who have only in the last decade or so adopted democratic political structures and whose national incomes are in some cases only a tenth to a fifth of the EU on a per capita basis. Perhaps the greatest problem involved with this eastwards expansion of the EU is that of dealing with the Common Agricultural Policy (CAP).

It is an aim of this essay to demonstrate that changes or reforms will have to be made to the CAP prior to enlargement for numerous reasons, which, throughout the course of this essay will be explained. The objectives of the CAP were laid down in the Treaty of Rome, Article 39 in 1957. Since then no revisions have been made, so the objectives still apply. Five objectives are identified in the treat but it can hardly be disputed that the farm income objective, assuring a fair income for the farm population, has become the main objective of the policy.

Other objectives are increased agricultural productivity, stable markets, assured food supplies and reasonable prices for consumers. Basically, all EU farmers are guaranteed the same minimum price for their produce, irrespective of how much they produce, the world prices and the levels of supply and demand. The EU member states share the financial burden of making all this possible. Perhaps one of the major problems that Eastwards enlargement would cause is the extra annual cost of extending the present CAP to the new member states. There have been various estimates of the cost of this.

One such estimate, made by the European Commission, put the extra annual cost at 12 billion European Currency Units (ECU). This figure is for all the ten proposed Central and Eastern European (CEE) countries and Cyprus to join. The countries negotiating entry to the EU are Cyprus, Poland, Slovenia, Hungary, The Czech Republic and Estonia. These countries are in the first round of future entrants and could join the EU between 2002 and 2005. In the second round of EU enlargement are Romania, Bulgaria, Slovakia, Lithuania and Latvia. These countries are expected to enter at a later date, although no concrete schedule exists.

If the CAP is to be reformed, that is if the current fifteen EU member states wish to reform the CAP, this must be done before any widening of the EU takes place. Any reforms proposed after the entry of the CEE countries will almost certainly be blocked for a number of reasons. In Central and Eastern Europe there is a very high proportion of the population employed in agriculture and if the proposed membership of the aforementioned Eastern European states were to materialise, then the political influence of agricultural interests in the EU would increase greatly, making it very difficult to achieve future post-enlargement reforms to the CAP.

Under the present arrangements with regard to the distribution of votes in the Council of Europe, which enhance the power of the smaller countries, the entry of the proposed CEE countries would be highly problematic. This is because already the eight smallest states can block a measure even though they only have some 12% of the EU’s population. Central and Eastern European majority political parties tend to have a left – right dimension, with reformed communists to the left and parties with a stronger business, nationalist or religious affiliation to the right.

However, there are also specialist agricultural parties which appear to be able to exert strong influence in some instances. For example, in Poland, the Peasants Party has, in the recent past represented agricultural interests in a coalition government with the reformed communists. Also, in Romania, the coalition government which replaced that of the reformed communists in November 1996 has had a nominee of the Christian Democratic National Peasants Party occupying the post of Prime Minister. Therefore, with these and other similar CEE states voting in the Council of Europe, the chances of reforming the CAP would be minimal.

Even if the chances of reforming the CAP after enlargement were much greater, it is still well within the interests of the current European fifteen to reform it before, primarily for financial reasons because as previously stated, the high proportion of the population of the countries of CEE employed in agriculture, coupled with the ability of these countries to greatly increase agricultural output in response to higher prices (which with guaranteed minimum price of the EU would almost certainly be the case), would prove extremely costly.

The financial burden would increase immensely and this would mean that some current beneficiaries of the CAP would become net contributors. Also the current net contributors would find themselves becoming even more so. The reforms to be made to the CAP are debatable, but there seems to be a strong case to heavily reduce its budget. One argument to support such a reduction is the argument that the CAP has, as a primary objective, the assurance of a fair income for the farming households. However, this objective, set in 1957 in the Treaty of Rome, can be questioned.

Is there really an income problem in agriculture? Or is it more of a general social problem? Can the transfer of money to all farmers be justified just because some of them may have an income problem? Unless the income payments to the farmers are arranged on a household basis and all income and wealth assessed, they should not be called income payments, and in any case, a strong argument can be advanced as to why the normal social state benefits available to the rest of the population are inadequate for this small occupational group.

Overall, it no longer seems a justified policy to continue the special income for farmers and not for other small groups in society. the CAP currently accounts for nearly half of the EU’s budget. Would it be fair to say therefore that agriculture is the single most important issue facing the European Union? Whilst some agricultural producers may have an income problem, surely this cannot be compared with the persistent levels of high unemployment in Europe, especially in the Southern, Mediterranean countries such as Spain, Greece ant the South of Italy.

Considerably less of the EU’s budget is spent on combating and remedying unemployment and it could be argued that more of the EU’s budget should, in fact, be allocated to this problem at the expense of agriculture. In addition to this, the CAP appears to be an unbalanced policy. There seems to be an over reliance on price support, market measures and farmers incomes, whereas the resources dedicated to rural development and environmental protection are relatively small.

Since the entry of Austria, Finland and Sweden to the EU in 1995 there has been an increased emphasis on the environmental aspects of agriculture support, however there is still not enough. From these arguments for reforming the CAP, it is apparent that all require a reduction in spending on agriculture, and therefore, in order to achieve such reforms of the CAP, it must be done before any Eastwards Enlargement of the EU.

As demonstrated in this essay, the introduction of the ten CEE countries and Cyprus would increase agricultural interests in the EU and it would not be a rash statement to say that any attempted reform as mentioned in this essay would be very likely to fail. A possible way to resolve these possible future problems and to alleviate the financial burden that the Eastwards enlargement of the EU would produce would be not to fully apply the CAP to the CEE countries. However, this is purely a speculative idea and something which would surely meet with stiff opposition from the future EU entrants.

The conclusion reached by this essay is that the CAP has a great need for reform as although its objectives laid down in 1957 may have been entirely warranted and correct, today there appears to be less need of such policies and objectives. Now there are other and perhaps more important areas of European policy which merit more attention. Therefore reform of the CAP is most definitely needed. However, this reform must be undertaken before any Eastwards enlargement of the EU.

This is due to the fact, as this essay has demonstrated, that the entrance of the CEE countries to the EU would drastically increase the agricultural interests in the EU and with the blocking system used in the Council of Europe, any attempted CAP reform (which surely would involve a reduction in the influence of the CAP), would be futile as it would be blocked. One way to avoid this would be to not apply fully the CAP to the future EU entrants. However, whether the CAP will apply or not to these Central and Eastern European countries, it is vital that it be reformed before their entrance to the European Union.

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