THE EU AGRICULTURAL POLICY: A CONSUMER VIEWPOINT

The final objective of government intervention is the attainment of the 'common good' for society as a whole. Government are supposed to intervene in market economies mainly in order to offset market failures. However governments themselves often fail to maximise the common good, especially when private interests prevail. In the decision-making process of the CAP agricultural lobbies play a predominant role, without any substantial counterpart lobbying to defend the interest of society as a whole. Although, according to common sense, food surpluses and related budgetary costs (export subsidies, food storage, etc.) would disappear if public price support were dismantled, this elementary solution to the most important problems raised by the CAP was never fully accepted. The cost of the CAP, mainly due to the agricultural price and farm revenue support, amounts to almost 50% of the EU budget, paid by taxpayers. Moreover, according to OECD estimates, an almost similar invisible transfer of income to agricultural producers is borne by consumers paying higher market prices. Consequently, although agriculture accounts only for 1.7% of the Community GDP, the cost of the CAP as big as the total EU budget. The performance of sectoral economic policies is usually appraised on the grounds of three sub-objectives better specifying the broad dimensions of social well-being: economic efficiency, social equity and environmental sustainability. The effects on economic efficiency are manifestly negative. Domestic market prices are distorted among farm products, capital and labour resources are retained in agriculture while their productivity for society as a whole would be much larger in other industries. If at least the CAP were consistent with structural adjustment in the long term then, sooner or later, the problem would be solved and the present waste of economic resources terminated. Unfortunately this is not the case as present distortions in market prices generate distorted investments. In terms of social equity, higher food prices act as a regressive tax on food burdening proportionally more worse-off households who spend a much larger share of their family budget on food than better-off households. On the other hand better-off farmers producing larger amounts of commodities whose price is supported get a much larger share of the benefits. As a result income disparities among citizens are increased. In terms of environmental sustainability the impact of farm price support is mixed. On the one hand higher farm prices stimulate the use of polluting inputs such as fertilisers and pesticides. On the other hand price support is likely to prevent serious problems in terms of depopulation or reduced environmental standards in some marginal regions. However these positive effects are circumscribed to specific areas and could be attained in a much more effective way by specific agri-environmental and agri-regional policy measures. According to the recent document of the Commission Agenda 2000, the very nature of the CAP will not be substantially changed before 20006. The worse aspects of the CAP in EU-15 will be reduced to a certain extent, but this positive impact on European social well-being is likely to be largely offset by the negative impact on new Member Countries which will have to accept the acquis communautaire in agricultural policy. In the Amsterdam Treaty a strong 'horizontal clause' is instituted by which Community Consumer Policy should also monitor the other EU policies both at Community and national level in order to protect consumer interests. Up to now the noxious effects of the agricultural price support policy could be cast to farm lobbies and to ill-informed policy makers, however in the future the Consumer Policy will be co-responsible for the reduction of social welfare generated by the CAP as well as by other sectoral policies.Agricultural and Food Policy,

THE CAP REFORM AND EC-US RELATIONS: THE GATT AS A "CAP" ON THE CAP

Reform of the Common Agricultural Policy has entailed the substitution of new income support instruments for the former price based instruments, mainly in the cash crop sector. Our first point is that the domestic political balance was unable to generate such a large change in policy design, in spite of inefficiencies and inbalances. The pressure of the US has been a major factor in the design of the reform. We argue that trade interests have been crucial to catalyze international collective action in order to countervail domestic pressure groups. The pursuit of an agreement in the GATT is therefore a means to place a cap on the CAP and foster some reform and control over sectors such as sugar and dairy in other countries. We do not foresee the disappearance of sources of tensions between the two countries, as EC animal products become more competitive and as the working of the CAP in the vicinity of world prices will make trade flows sensitive to world macro-economic and agricultural shocks. The Uruguay Round, should not be considered as fully satisfactory, and the long-run objective of further decoupling of payments from production incentives should be pursued.Agricultural and Food Policy,

AGRICULTURAL POLICY DEVELOPMENTS IN THE EUROPEAN UNION; Proceedings of the Fourth Minnesota Padova Conference on Food, Agriculture, and the Environment, September 4-10, 1994, Wayzata, Minnesota

The reform of the Common Agricultural Policy (CAP) adopted on 21 May 1992, to be implemented by 1996, anticipates some essential features of the 1994 Uruguay GATT Agreement to be implemented between 1995 and 2000. Together these two events will change substantially, and sometimes reverse, the past trends in the EU agricultural policy, and generate unprecedented changes in production, trade, as well as in producers' and consumers' welfare, creating conditions for a more timely structural adjustment. This paper will first outline the new scenario of agricultural policy in the EU in order to better devise its likely impact on the economy, namely on income distribution, on resource allocation and on the natural and social environment. A third part of the paper will focus on the perspective developments of the CAP before the beginning of the next round of multilateral negotiations in 1999, examining the possibility of a further progress of CAP reform triggered by the implementation of the GATT agreement and by a better information among European citizens of the effects of existing agricultural policies

La politique agricole commune et les régions méditerranéennes : un point de vue italien

[eng] Common agricultural policy and mediterranean regions : an italian point of view . In Italy, as well as in other Mediterranean countries of the EC, average labour productivity in agriculture is very low often due to insufficient farm size. This inefficient production structure is a consequence of the traditional agricultural policy aiming all keeping a large number of people in the agricultural sector. Special support to small, inefficient farms contributed to keep a production structure permanently in need of public aid. By substantially reducing product price support, the CAP reform could allow the implementation of an efficient structural policy by increasing the intersectoral mobility of resources and favouring domestic and international economic development. In order to reach this objective, the modalities by which the reduction in farm income is compensated become of strategic importance : if compensation is computed every year and only on part of the farmed area, administrative costs and opportunities for fraud will be very high while structural adjustment will be hindered. On the other side, if compensation is computed only once for a pre-defined number of years and paid through bonds salable on the financial markets, administrative costs and frauds will be much lower and farmers would be provided with a means to increase their farm size or to invest in other non farm activities, favouring in such a way a larger occupational flexibility and both agricultural and non-agricultural economic development. [fre] L'agriculture italienne, comme celle d'autres pays méditerranéens de la Communauté Européenne, est caractérisée par une faible productivité moyenne du travail agricole, qui peut être attribuée souvent aux dimensions insuffisantes des exploitations. Cette inefficace structure de production est due à la traditionnelle politique agricole d'assistance dont le but était de maintenir l'emploi dans le secteur primaire. Les aides aux petites exploitations ont contribué à maintenir une structure de production qui a chroniquement besoin de l'aide publique. La réforme de la Politique Agricole Commune à travers une forte réduction du soutien des prix agricoles pourrait permettre une efficace politique structurelle et augmenter la mobilité intersectorielle des ressources en favorisant le développement économique national et international. A cette fin, les modalités adoptées pour compenser la réduction du revenu agricole sont très importantes : si ces compensations sont calculées chaque année et seulement sur une partie de la surface d'exploitation, elles constitueront une forte charge administrative, retarderont l'ajustement structural des entreprises et augmenteront les possibilités de fraude. Si elles sont calculées une fois pour toutes sur toute la surface cultivée et si elles sont concédées pour un nombre d'années déterminé, par le biais de titres de crédit susceptibles d'être commercialisés sur le marché financier, les charges administratives et les possibilités de fraude seront réduites, ces compensations fourniront à l'agriculteur un instrument pour agrandir son entreprise ou pour investir dans d'autres activités, favorisant ainsi une plus grande flexibilité d'emploi et le développement tant agricole qu'économique des zones rurales et de la collectivité dans son ensemble.

La crise de la PAC : un point de vue italien

[fre] Les problèmes agricoles italiens sont très particuliers et divers et il n'y a pas, dans ce pays, de position unique ou même majoritaire sur la réforme de la PAC. Si on dépasse des calculsétroitementcomptables, l'Italie est clairement perdante dans les soldes des transferts liés à la PAC car elle achète, beaucoup trop cher, des quantités élevées de lait, de céréales et de viande. Il serait souhaitable pour l'Italie de supprimer les MCM ; de ne pas recourir à des systèmes de contingentement qui feront de la plupart des régions italiennes des zones sans privilèges; de mettre en place des crédits libellés en ECUs; de développer les actions structurelles. Mais l'Italie aura du mal à profiter de ces politiques en raison de faiblesses administratives. (Réd.). [eng] Italian farm problems are very peculiar and diverse and there is no unanimous or even majority position on CAP reform. Italy is clearly a net loser in the intra-EEC balances of transfers, at least when non budget transfers are included. This is due to large high imports of milk, grain, meat. It would be in the interest of Italy to suppress MCAs; to refrain from setting up quotas, since most regions of the country will not begetting the advantages of having them ; to improve the distribution of farm credit and have loams computed in ECUs ; to develop structural measures. On account of administrative weaknesses it will be difficult for Italy to fully benefit from those policies.

Prix et revenus dans le secteur agricole

[fre] Dans les économies de marché européennes, les revenus agricoles subissent fortement l'influence de l'intervention publique, qui peut être analysée en termes théoriques en référence à un secteur économique où prévaut la libre concurrence. . Après avoir esquissé les différentes catégories de coûts et d'avantages sociaux qui peuvent être produits par la politique économique sectorielle, on présente une brève analyse des effets de l'intervention publique sur l'allocation des ressources, sur la distribution du revenu et sur d'autres objectifs non économiques, afin de tracer un système d'objectifs coordonné et cohérent pour la politique économique en agriculture. Les politiques des prix liées à la stabilisation des marchés et au soutien des prix des produits, des moyens techniques et des facteurs de production, sont ensuite brièvement passées en revue. Enfin, un problème subsiste : combiner au mieux les différentes politiques des prix et des revenus agricoles, avec un système défini d'objectifs d'intervention publique dans le secteur agricole. . Les résultats de cette analyse théorique montrent une grande incohérence entre les politiques économiques actuellement appliquées dans la Commmunauté Européenne et les composantes principales du bien-être social. [eng] In European market economics, farm incomes are strongly influenced by policy actions. Their effects can be analyzed using a free market sector as theoretical benchmark. Sectoral policies produce various social costs and benefits. They influence resource allocation, income distribution and other non economic objectives. The paper evaluates market stabilization, and price support policies as well as those concerning factors of production and technology. One of the major issues is the combination of the various price and income policies in order to attain a given set of policy goals in the farming sector. This theoretical analysis shows that the various policies at work in the EEC are quite inadequate considering its main welfare goals.

THE EU AGRICULTURAL POLICY: A CONSUMER VIEWPOINT

The final objective of government intervention is the attainment of the 'common good' for society as a whole. Government are supposed to intervene in market economies mainly in order to offset market failures. However governments themselves often fail to maximise the common good, especially when private interests prevail. In the decision-making process of the CAP agricultural lobbies play a predominant role, without any substantial counterpart lobbying to defend the interest of society as a whole. Although, according to common sense, food surpluses and related budgetary costs (export subsidies, food storage, etc.) would disappear if public price support were dismantled, this elementary solution to the most important problems raised by the CAP was never fully accepted. The cost of the CAP, mainly due to the agricultural price and farm revenue support, amounts to almost 50% of the EU budget, paid by taxpayers. Moreover, according to OECD estimates, an almost similar invisible transfer of income to agricultural producers is borne by consumers paying higher market prices. Consequently, although agriculture accounts only for 1.7% of the Community GDP, the cost of the CAP as big as the total EU budget. The performance of sectoral economic policies is usually appraised on the grounds of three sub-objectives better specifying the broad dimensions of social well-being: economic efficiency, social equity and environmental sustainability. The effects on economic efficiency are manifestly negative. Domestic market prices are distorted among farm products, capital and labour resources are retained in agriculture while their productivity for society as a whole would be much larger in other industries. If at least the CAP were consistent with structural adjustment in the long term then, sooner or later, the problem would be solved and the present waste of economic resources terminated. Unfortunately this is not the case as present distortions in market prices generate distorted investments. In terms of social equity, higher food prices act as a regressive tax on food burdening proportionally more worse-off households who spend a much larger share of their family budget on food than better-off households. On the other hand better-off farmers producing larger amounts of commodities whose price is supported get a much larger share of the benefits. As a result income disparities among citizens are increased. In terms of environmental sustainability the impact of farm price support is mixed. On the one hand higher farm prices stimulate the use of polluting inputs such as fertilisers and pesticides. On the other hand price support is likely to prevent serious problems in terms of depopulation or reduced environmental standards in some marginal regions. However these positive effects are circumscribed to specific areas and could be attained in a much more effective way by specific agri-environmental and agri-regional policy measures. According to the recent document of the Commission Agenda 2000, the very nature of the CAP will not be substantially changed before 20006. The worse aspects of the CAP in EU-15 will be reduced to a certain extent, but this positive impact on European social well-being is likely to be largely offset by the negative impact on new Member Countries which will have to accept the acquis communautaire in agricultural policy. In the Amsterdam Treaty a strong 'horizontal clause' is instituted by which Community Consumer Policy should also monitor the other EU policies both at Community and national level in order to protect consumer interests. Up to now the noxious effects of the agricultural price support policy could be cast to farm lobbies and to ill-informed policy makers, however in the future the Consumer Policy will be co-responsible for the reduction of social welfare generated by the CAP as well as by other sectoral policies

AGRICULTURAL POLICY DEVELOPMENTS IN THE EUROPEAN UNION; Proceedings of the Fourth Minnesota Padova Conference on Food, Agriculture, and the Environment, September 4-10, 1994, Wayzata, Minnesota

The reform of the Common Agricultural Policy (CAP) adopted on 21 May 1992, to be implemented by 1996, anticipates some essential features of the 1994 Uruguay GATT Agreement to be implemented between 1995 and 2000. Together these two events will change substantially, and sometimes reverse, the past trends in the EU agricultural policy, and generate unprecedented changes in production, trade, as well as in producers and consumers welfare, creating conditions for a more timely structural adjustment. This paper will first outline the new scenario of agricultural policy in the EU in order to better devise its likely impact on the economy, namely on income distribution, on resource allocation and on the natural and social environment. A third part of the paper will focus on the perspective developments of the CAP before the beginning of the next round of multilateral negotiations in 1999, examining the possibility of a further progress of CAP reform triggered by the implementation of the GATT agreement and by a better information among European citizens of the effects of existing agricultural policies.Agricultural and Food Policy,