Common Agricultural Policy - The CAP Today

The CAP Today

The CAP has been substantially reformed. The policy is very different and evolved than when it was created by the Treaty of Rome (1957). The reforms over the years have moved the CAP away from a production-oriented policy. The 2003 reform has introduced the Single Payment Scheme (SPS) or as it is known as well the Single Farm Payment (SFP).

Each country can choose if the payment will be established at the farm level or at the regional level. Farmers receiving the SFP have the flexibility to produce any commodity on their land except fruit, vegetables and table potatoes. In addition, they are obliged to keep their land in good agricultural and environmental condition (cross-compliance). Farmers have to respect environmental, food safety, phytosanitary and animal welfare standards. This is a penalty measure, if farmers do not respect these standards, their payment will be reduced.

The direct aids and market related expenditure make up 31% of the total EU budget. The total CAP budget is 42% of the EU budget (31% -direct aid + 11% – Rural Development). It represented 48% of the EU's budget, €50 billion in 2006, up from €48.5 billion in 2005. The CAP budget is constantly shrinking: from 71% in 1984 to an expected 39% in 2013.

Market mechanisms: Intervention mechanisms have diminished significantly: the Commission intervenes only on: common wheat; butter and skimmed milk powder. The Health Check of the CAP agreed in November 2008 has added on a number of measures to help the farmers to respond better to signals from the markets and to face new challenges. Among a range of measures, the agreement abolishes arable set-aside, increases milk quotas gradually leading up to their abolition in 2015, and converts market intervention into a genuine safety net. Ministers also agreed to increase modulation, whereby direct payments to farmers are reduced and the money transferred to the Rural Development Fund.

Milk quotas will expire by April 2015. Therefore in order to prepare the dairy farmers for this transition, a 'soft landing' has been ensured by increasing quotas by one percent every year between 2009/10 and 2013/14. For Italy, the 5 percent increase will be introduced immediately in 2009/10. In 2009/10 and 2010/11, farmers who exceed their milk quotas by more than 6 percent will have to pay a levy 50 percent higher than the normal penalty.

Since 2000, there is the Rural Development Policy, known as well as the "second pillar" of the CAP. This policy aims to stir the economic, social and environmental development in the countryside. Its budget, 11% of the total EU budget is today allocated along three main areas, known as axis. The first axis, focuses on improving the competitiveness of the farm and forestry sector through support for restructuring, development and innovation. The second one concerns the improvement of the environment and the countryside through support for land management as well as helping to fight climate change. Such projects could for example concern preserving water quality, sustainable land management, planting trees to prevent erosion and floods. The third axis concerns improving the quality of life in rural areas and encouraging diversification of economic activity. The policy also provides support to the Leader rural development methodology, under which Local Action Groups design and carry out local development strategies for their area. Member States distribute "second pillar" funds through Rural Development Programme actions.

The European Commission is now discussing the next reform of the CAP which will coincide with the next financial perspectives package, as from 2014. The Commissioner responsible for Agriculture and Rural Development Dacian Cioloş, has outlined seven major challenges which the future CAP needs to address: food production, globalisation, the environment, economic issues, a territorial approach, diversity and simplification