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The early days of the policy

7 important questions on The early days of the policy

The objectives of the CAP, which came into force from 1962, were laid down in the Treaty of Rome in 1957 and subsequently at the Stresa Conference in july 1958. Which three general principles underpinned the policy?

1) Market unity;
2) Community preference;
3) And financial solidarity.

o Market unity = The removal of protection across the Union, allowing agricultural produce to move freely across borders.
o Community preference = The preference and price advantage from which EU agricultural products benefit in comparison with imported products.
o Financial solidarity = The sharing of financial burdens across the EU members.

The initial move in establishing a European agricultural market (applying the so-called market unity principle) was the setting up of what?

Common market organizations (CMOs) for all agricultural products. The idea was to allow free trade internally within the Community, but also to erect barriers to the outside world, to protect the income of European farmers.

The CMOs usually operated on the basis of which three complementary policy tools?

1) A guaranteed price;
2) A public intervention system;
3) And some variable levies at the Community's border.

Variable levy = In the context of the CAP, a levy raised on produce before it enters the common market, so that it is priced at or above the internal price. A system of 'reimbursements' (refunds) enables European producers to sell their products on the world market at world prices without losing income.

First, the notion of a guaranteed price is crucial to understanding how the CAP operated. What was the idea?

That the specificities of the farming sector (dependence on climatic conditions and vulnerability to natural disasters) and the consequent structural instabilities of agricultural markets made some public intervention necessary to guarantee decent living conditions for farmers. This is why, instead of allowing the market to determine price levels, the prices that farmers received for their produce were institutional prices - that is, they were fixed centrally by Community civil servants and politicians.

Such a system had the objective of what?

Of both supporting farmers' incomes and boosting agricultural production: the more farmers produced, the more money they earned.

Second, if the price began to fall owing, for example, to an excessive internal supply, which would have had the effect of depressing farmers' incomes, what would happen?

Intervention agencies would step in when the price reached a certain level (the intervention price) to buy up the surplus and store it until the market was balanced again, thus keeping prices high.

Guarantee price (or intervention price) = In the context of the CAP, the (agricultural) price at which member states intervene in the market to buy up produce.

Finally, to promote the principle of financial solidarity, a commonfund was set up to cover the financing of the CAP. This fund, the European Agricultural Guidance and Guarantee Fund (EAGGF), comprised which two parts?

Guidance and guarantee. While the guarantee section covered costs attached to the operation of the market system, such as the costs of intervention and export refunds, the much smaller guidance section was responsible for funding structural policies.

Structural policy = The EU's framework to maintain a sufficient level of economic and social cohesion amongst member states. It incorporates a number of programmes and financial instruments, including the Structural Fund, with which to achieve its aims.

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The early days of the policy

7 important questions on The early days of the policy

The objectives of the CAP, which came into force from 1962, were laid down in the Treaty of Rome in 1957 and subsequently at the Stresa Conference in july 1958. Which three general principles underpinned the policy?

The initial move in establishing a European agricultural market (applying the so-called market unity principle) was the setting up of what?

The CMOs usually operated on the basis of which three complementary policy tools?

First, the notion of a guaranteed price is crucial to understanding how the CAP operated. What was the idea?

Such a system had the objective of what?

Second, if the price began to fall owing, for example, to an excessive internal supply, which would have had the effect of depressing farmers' incomes, what would happen?

Finally, to promote the principle of financial solidarity, a commonfund was set up to cover the financing of the CAP. This fund, the European Agricultural Guidance and Guarantee Fund (EAGGF), comprised which two parts?

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