Changing Commodity Prices Impact On Common Agricultural Policy Economics Essay

Changing Commodity Prices Impact On Common countrified Policy Economics EssayIn the wake of an increasingly internationalized economy, one that has seen the emergence of large get by blocs and common markets, the nations of the world have been competitively strained into becoming to a greater extent economically integrated year after year. In light of hundreds of long time of consumer theory, this would almost certainly lead one to a coating of necessarily press down footings and to a greater extent efficient production on almost all products. However, as is the case in many nations, the European Union (EU) has succeeded in creating an artificial market for rude products through the use of a Common Agricultural Policy (C.A.P).The Common Agricultural Policy is a policy, set forwards by the European Union (EU), which is comprised of a set of rules that regulate the production, trade, and processing of countrified products. The C.A.P currently accounts for almost fifty percent of the EU budget, however, this number continues to devolve over the geezerhood. The C.A.P is significant in that it symbolizes Europes switch from sovereignty on a national take to a European level. (McDonald and Dearden, (2005), European Economic Integration, Prentice Hall, quaternary edition.)Common Agricultural Policy (C.A.P).The EUs rural policy dates back to 1957, when the creators of the Treaty of Rome delimitate the general objectives of a common agricultural policy, post-war fare picayuneages lull fresh in minds. The principles and mechanisms of the Common Agricultural Policy (C.A.P) were adopted by the six founding members of the European Economic Community, and in 1962 C.A.P came into force.C.A.P was designed to secure Europes self-sufficiency in food production. The basic principles of C.A.P re mained the same for decades guaranteed prices for agricultural products, often above world price levels, and subsidies based on the quantity of production, with little concern for the business of surplus production.C.A.P has been the most fully integrated of EU policies. In the 1970s, nearly 70% of the EU budget went into land. After a series of remedys, agriculture expenditures in the budget have dropped to 35 % for the 2007-2013 financial period. Over the same period, more money (9.7%) has been allocated for rural development and the expansion of EUs other responsibilities. (Common Agricultural Policy (C.A.P).European journalism sum (EJC) 2009).Common Agricultural Policys reforms.The C.A.P has had a long hi bosh of reform, and is nowhere near perfect. The first attempt at reform came just ten years after its implementation. In 1968, the Mansholt Plan was put into effect in an attempt to reduce the number of people in the agriculture business and to promote more efficient means of agricultural production. In 1972, the extensive food surpluses were targeted through the creation of structural measures designed to modernize European agriculture . This attempt at reform is generally regarded as a failure because many of the problems it tried to fix were still left unchecked. In 1983, a publication was released entitled, The Green Paper, which sought to quietus the ongoing disparities betwixt supply and demand through improvements in production. In 1988, the European Council confined on various reform measures. The most instantant was the agricultural expenditure guideline, which limited the percentage of C.A.P expenditure in the overall budget. In 1991-92, the future of the C.A.P was addressed through what has been called, the MacSharry Reforms. The key aspects of the reforms included the separatrixback of agricultural prices to make the products more competitive, compensation for farmers that incurred a loss in income, and environmental protection. The reform of 1992 was generally regarded as successful, with positive effect on European agriculture. However, multinational trends, the enlargement towards primeval an d Eastern Europe, the preparation of the single currency causing budget constraints, the increasing fight of products from non-member countries, and a new round of World Trade Organization negotiations constrained further adaptation of the C.A.P (europa.eu.int). In July 1997, Agenda 2000 was created to address many of the important issues facing the EU and the C.A.P. The key focuses of this new agenda atomic number 18 the reinforcement of the competitiveness of agricultural commodities in domestic and world markets, the promotion of a fair standard of living, the creation of extra sources of income for farmers, a new rural development policy, revamped environmental considerations, better food quality and safety, and the simplification of C.A.P legislation.The first wave of C.A.P reforms had decreased over-production, brought down butter mountains and emptied the milk lakes. But by 2002, several factors made it a necessity to undertake major review of the EUs farm policy, includin g several food crises, the EUs planned eastward expansion, World Trade Organizations objections to the C.A.P and the sustainable development strategy defined during the Gothenburg Summit. In 2003, Franz Fischler, then the Commissioner for market-gardening, Fisheries and Rural Development, presented a C.A.P reform package he described as the most radical improvement to the EUs agricultural policy ever. His main proposals includeddecoupling of subsidies and productionhigh requirements of environmental, food safety and animal welfare standards as prerequisite for getting subsidiesmore money to rural development as opposed to shoot for and market subsidiescuts in intervention prices in many firmamentsAfter heated debate, farm ministers agreed to go through with the C.A.P reform. Although, the link between farm subsidies and the amount of production was not totally abolished, as originally proposed, a major shift did take place, with the bulk of farmers income now coming from direct a id, based on the size of their holdings and not production. (Common Agricultural Policy (C.A.P).European Journalism Centre (EJC) 2009).The reform also prepared the EU for the WTO Doha round of international trade liberalization talks, where the EU offered to eliminate export subsidies altogether by 2013. The talks were put on hold in 2006. Whatever the result of the trade talks, the EU remains the worlds largest importer of food, especially from developing countries.A number of sensitive sectors were left out of the 2003 C.A.P reform, including sugar, wine, bananas and other fruits and vegetables. Since then, a profound reform of the sugar sector was agreed on in 2005. In 2006 and early 2007 the Commission also proposed reforms for the wine, banana and fruit and vegetables sectors. (Common Agricultural Policy (C.A.P).European Journalism Centre (EJC) 2009).Under the Barroso Commission, Mariann Fischer Boel took over stewardship of the renamed Agriculture and Rural Development DG. She continues to strive for higher food quality and safety, efficient application of the Rural Development Policy 2007-2013, energy crop schemes and simplification of the C.A.P and cutting of red tape.The enlargement of the EU from 15 to 27 members has brought new challenges to C.A.P the number of farmers in the EU increased by over 70%.Meanwhile, land organisations have welcomed the EUs decision to set a minimum 10% target for the use of biofuels for transport by 2020. The EU has also created the possibility for agriculture to mutation a bigger role in the fight against climate change, according to the COPA organisation.A key aim of the 2008 French EU Presidency was to bring the C.A.P up to speed with new global challenges. To this end, with the backing of the Commission and a vast majority of member states, four texts were adopted in November 2008, focusing on rural development, direct aid to farmers, and regulation mechanisms for the single market (dairy quotas, interventions, et c.). (A health check(CAP)by Europa (European Commission) (2009)).These agreements officially launched the EU debate on the future of the C.A.P post-2013, also taking stock of global food balances, competitiveness, sustainable development, and the economic dynamism of rural areas.The Czech Presidency of the EU, in the first semester 2009, failed to secure an agreement on the future of the C.A.P post-2013. However, the Agriculture Council did agree unanimous conclusions on agricultural product quality and the retargeting of aid in Less Favoured Areas (LFA). (Common Agricultural Policy (C.A.P).European Journalism Centre (EJC) 2009).The quality policy paves the representation to clearer labelling and, it is hoped, better communication and understanding among farmers, wholesalers and consumers. The Council also said it would consider national and private food certificates that fol downcast Commission good practice guidelines and pledged to cut red tape for farmers and producers who want to apply for EU schemes like the organic label and geographical indications.The LFA programme is designed to improve the targeting of aid to farmers in areas with vivid handiC.A.Ps. Member states have been asked to produce maps by 31 January 2010, including specific details on climate, soil, and terrain. (Common Agricultural Policy (C.A.P).European Journalism Centre (EJC) 2009).Global food prices and C.A.P reform.The European Unions common agricultural policy protects and subsidizes agriculture so heavily as to bring serious social losses to the Economic Union. The policy creates inefficiencies in the agriculture sector as well as other sectors of society such as manufacturing, textiles, and service industries. Furthermore, there have been many economic consequences of the C.A.P, including the high level of protection, the burdens on consumers, taxpayers, and the EU budget, environmental damage, the harm to international trading relations, and the failure to raise farmers incomes (The Common Agricultural PolicyPast, Present and Future. Brain E.Hill. Metheuen Co. Ltd, London. (page 117). There are a lot factors responsible of the food price rise speculation in commodity markets, low global food stocks, subsidies, high cost of energy, minginess of important agricultural markets in the hands of a few firms, trade restrictions by important exporters to protect domestic consumers, depreciation of the US dollar and lower productivity growth due to low investment in agricultural researchAs global priceshit new highs,the European Commission had to intervene. depression they sold its intervention stocks, removed the obligation to set aside 10% of arable land for the 2008 harvest, increased milk quotas by 2% and suspended import duties on cereals. (Global food prices and CAP reform by Euractiv. (2009). Then, theCommissionproposedpolicymeasures aimed at improving market transparency. It decided to enhance monitoring ofdevelopments in agricultural markets andanalyze the impact of price speculation.The EU executive also announced plans toinvestigate the functioning of the food supply chain for potential unfair commercialized practices, which may be holding back competitionanddriving up prices.Overall, the Commissionspolicy to address rising global food prices comprises threestrands of actionMitigating short and medium-term effects of the food price shockby monitoring price developments and speculative investments, changing the CAPIncreasing agricultural supply and ensuring food shelter in the longer termby strengthening the sustainabilityof EU and global policies on biofuels, boosting agricultural researchto increase productivity and maintaining an open but ready GMO policy,andContributing to the global effort to help the poorby promoting an open trade policy and concluding the Doha round of World Trade geological formation (WTO) talks,offering humanitarianaid and supportingagricultural and rural development policy changes in developing coun tries. (Global food prices and CAP reform by Euractiv. (2009).C.A.P effects upon the environment.The C.A.P has also caused concern for the environment as well as concerns for the economy. Because of the subsidies provided to farmers, they have the incentive to produce more agricultural products because they will receive more money. The C.A.P price policies have encouraged intensive farming and the overuse of antibiotics, pesticides, and nitrates. This has put a strain on the environment and has concerned the people of the European Union. The policy did not foresee farmers overproducing and over using chemicals, but this has become an indirect cost created by the policy. Europeans are also concerned with food safety because of farmers using so many chemicals in production. Farmers have been getting away with using the chemicals and unsafe practices because of the limited food safety regulations. Policymakers believed that high price supports would lead to higher food safety and quali ty. High support prices do not increase either food safety or quality indeed, minimum prices and intervention guarantees encourage low quality and standardized produce (The European Community Economic and Political Aspects. (V.Lintner and S.Mazey. Mcgraw-Hill, Maidenhead. (page 107) (1991).CCL C.A.P has been seen as a monument to the determination of politicians, especially in the early years of integration, to work together for a united Community. It has become a symbol of co-operation. C.A.P has economic and social dimensions.There are many reasons put forward to informrisingfood prices. These range from changing eating habits to trade restrictions and climate change. TheEuropean Commissioninsists that there is no connection between EU agricultural subsidies and rising food prices, andstresses that the C.A.P ismuch less trade-distorting than the American policy.(Global food prices and CAP reform by Euractiv. (2009).ANNEXESFigure 2 EU agricultural payments, 1963-2013.Source Agricu lture 2009 revised.pptFigure 3 EU expenditure 1988-2006.Source Agriculture 2009 revised.pptFigure 4Source Agriculture 2009 revised.pptFigure 5 and 6Source Europa.REFERENCES meshing SITESGlobal food prices and CAP reform by Euractiv. (2009)http//www.euractiv.com/en/cap/global-food-prices-cap-reform/article-184329Accessed 15th February 2010.Common Agricultural Policy (CAP) by European Journalism Centre (EJC). (2009)http//www.eu4journalists.eu/index.php/dossiers/english/C8Accessed 16th February 2010.Agriculture CAP by Europa (European Commission) (2009)http//europa.eu/pol/agr/index_en.htmaccessed 16th February 2010.The Doha Development Round of trade negotiations understanding the issues by OCDE. (2008).http//www.oecd.org/document/45/0,3343,en_2649_201185_35738477_1_1_1_1,00HYPERLINK http//www.oecd.org/document/45/0,3343,en_2649_201185_35738477_1_1_1_1,00en-USS_01DBC.htmlHYPERLINK http//www.oecd.org/document/45/0,3343,en_2649_201185_35738477_1_1_1_1,00en-USS_01DBC.htmlHYPERLINK http//w ww.oecd.org/document/45/0,3343,en_2649_201185_35738477_1_1_1_1,00en-USS_01DBC.htmlen-USS_01DBC.htmlAccessed 17th February 2010.Fortress EuropeOne vision, one market Europe as a success story? (2008)http//www.groupedebruges.eu/Word docs/manifest_chapter_4_(draft_version_1).docAccessed 20th February 2010.LECTURELecture 11 Agriculture.SEMINARSeminar 11 Agriculture.Agriculture 2009 revised.pptREPORTSCAP reform document 970 Future CAP.pdf 981 Future CAP.pdfCAP report blunt Europe CAP report.pdf