Introduction
CAP (Common Agricultural Policy) is a policy by the EU member countries to see that the EU farmers have been protected to ensure that there is an increased production by the farmers which will lead to the economic growth of the member countries. CAP should be reformed due to the many benefits it will give to the member countries as we shall see below. The following is a report to the Head of the member state on why CAP should be reformed in the EU.
Should CAP be reformed?
CAP reform will mark the beginning of a new era in the EU farmers. It is out of the formation of the CAP policy that our farmers will be in a position to record great change in their farm production hence leading to an increased economic growth in most of our countries. This is because CAP is one of the effective policies that will mostly help the EU farmers to have a sustainable development hence increase their living standards. This is because the bulk to the direct payment will no longer be linked to the production but in either case, the CAP policy will help most of the EU farmers to stabilize most of their incomes hence at the same time be in a position to produce what the consumers really want. So with the CAP policy, it is sending a strong message to the world in that it is through the CAP policy that our farmers will be in a position to strongly compete with world in the globalization process since the CAP policy is a trade friendly reform in that it is a trade agreement that will help the EU farmers to record a great change in their total output in the near future hence be in a position to compete in the global market.
The CAP policy is saying goodbye to the old system of farming whereby most of the small scale farmers have been neglected and manipulated by the large scale farmers which also distorted the world trade in most of the EU farmers hence tending to harm most of the developing countries through the instability of the world prices. The CAP will ensure that the world prices have been stabilized so that the farmers can be in a position to market their total output well without having to incur so much losses. CAP should be reformed because most of the trade policies are highly trade-distorting and have also become increasingly so. This is because most of the agricultural policies do not address the farmers needs hence meaning that most of the trade has been highly distorted as a result of a lack of a good policy which will help most of the farmers both the large and the small scale to record an increased total output. (de Grauwe, 2005).
The policy position
It will be geared towards the consumers plus the taxpayer’s interest while at the same time continuing to assist farmers. You find that because of the issue of globalization, it is important to take care of our farmers both the large scale and the small scale in order to ensure that the agricultural sector in the EU has been improved. The best thing to achieve the new CAP is to ensure that the consumers and the taxpayers have been charged high since it’s through the tax which we get from such people that we will be in a position to improve our economy. (McDonald, 2005)
The new CAP will also ensure that we have safeguard the rural environment and economy in that the objective of reforming CAP is to ensure that our economy has increased. This will be achieved through helping the local farmers in the rural areas to increase their production. One of the ways of doing this is by ensuring that we have provided a ready market for their products and this will be achieved through stabilizing the market prices. You tend to find that when market prices are not well stabilized, it will mean that prices will tend to fluctuate and this will affect the farmers produce in that inflation is a bad thing when it occurs in an economy. So we will tend to safeguard the rural economy plus the rural environment through also the provision of farm inputs since you find that most of the rural farmers lack the basic farm inputs to produce their much output. So with the new reform, it will ensure that the local farmers are catered at hence this will definitely to improved economy in most of the EU countries.
The new reform will also ensure that we have kept budgetary costs quite stable and to be more manageable. Here as I said earlier, the new reform will take the initiative of stabilizing the market prices to ensure that the prices are stable for farmers to sale their many produce. This is because this is one of the major goals with the farmers since they would wish that the market prices in this case would be stable for them so that they can market their farm produce quite effectively. The government will also budget the farmer’s inputs like the provision of credits to the farmers so that they can purchase the farm inputs they would like to use say fertilizers among other farm inputs. (de Grauwe, 2005)
The new CAP policy will also ensure that it has negotiated a World Trade Organization (WTO) which is an agricultural agreement and this agreement will help to meet the farmer’s needs in the agricultural sector. The WTO is one of the trade agreements which have helped so many farmers to succeed in life in that it is through WTO that most of the member countries will be in a position to market their farm inputs well as well as leading to the realization of their competitive advantage. (Aggarwal and Fogarty, 2004)
WTO is a regional trade agreement and its one of the trade agreements which has done so much in the liberalization of trade in most of the countries especially in EU countries. It is the only body which has made the global trade rules with the binding effects to its members. It has done so much in fostering development by ensuring that the member countries have been in a position to trade effectively with the rest of the countries hence leading to the diversified growth. After a long term negotiation EU joined the WTO and it was after joining of this WTO that many of the countries have been in a position to succeed. So, with the introduction of WTO under the new CAP policy, you will find that our farmers will tend to benefit so much in that they will be in a position to market their farm produce plus the many incentives which are given to the farmers. Joining WTO has made the many farmers to increase in growth in that as a result of bringing imports operations in order, you find that most of the country has regulated the importation of agricultural products from the members who are not members of WTO hence making most of the agricultural products to be well marketable. (Aggarwal, and Fogarty, 2004)
The issue of reduced tariffs is one of the objectives of WTO. It ensures that there is a reduced tariff to all its member countries and hence most of its exports are exported at a lower price as when compared to the non member countries. It is out of this that the farmers can realize its competitive advantage through the reduced costs of trade. This is because WTO ensures that it has raised the tariffs of the imported agricultural product hence discouraging importers of agricultural products. As a result, then the farmers have been in a position to grow since there is a ready market both domestic and the international market. As a result, it has been in a position to compete with the rest of the industrialized countries hence leading to the realization of its competitive advantage. (Aggarwal, and Fogarty, 2004)
Incentives are also given to the farmers as a way of encouraging the farmers to produce more. These incentives are informed of less taxes and reduced export charges. As a result, the farmers are in a position to compete with the rest of the countries. These incentives should be given so that they can win the market so easily and also diversify their products. It’s through these incentives that the farmers are encouraged to produce more hence making more profits in return. So the farmer will benefit so much through the WTO in that since it restricts imports from non member countries, it will mean that no competition with the both the small and the large EU farmers who form members of WTO leading to the high profits it records every year. (Aggarwal, and Fogarty, 2004)
It is through the WTO agreements that people have been in a position to raise their standards of living. This is out of the benefits which they get from WTO through the trade with other developed countries at low costs. There is also full employment of the resources of the countries resources in that these products can be recycled to get other products which are also beneficial and can be used. Employment opportunities are also available to people hence people can benefit from these employment opportunities.
It’s also through WTO that EU farmers have benefited in terms of reduced agricultural imports in to EU countries. This is one of the objectives of the WTO since it ensures that there are no imports from the non member countries. As a result, you will find that there is a ready market both domestically and internationally hence leading to the sale of the agricultural products to the citizens of EU. It is also through the cut down of imports that few competitors can be seen competing with the EU farmers hence leading to competitive advantage. (Souderton, and Reed, 1994)
Arguments for
You will find that the EU new reform will be one of the crucial steps in helping the EU farmers in that the farmers in this case will be market oriented in that they will tend to be more competitive both domestically and with the world markets which will make them to have a reasonable income support. This is because through forming the CAP, you will find that the farmers in this case will record a huge increase in their production. They will compete with the rest of the world’s farmers hence lead to the realization of their competitive advantage. Globalization has come up with so many things hence unless we protect our farmers, the small scale farmers will not be in a position to compete so well with the rest of the farmers. So it is through the CAP that the farmers in this case will be protected hence competing so well with the rest of the farmers. (Souderton, and Reed, 1994)
The farmers will also reap the most rewards from farming in an environmentally sustainable way in that with the introduction of the CAP reform, you will find that the farmers in this case through the sustainable development will tend to have increased standards of living through the many profits which they will get through the CAP reform.
The farmers will also continue producing a high quality farm produce as when compared with before in that they will increase their production while at the same time produce quality farm outputs in the diverse regional situations that characterize the European agriculture and also bring an added value to the farmers. You will find that through the EU CAP reform, most of the farmers will tend to benefit in that they will have an added advantage through the many benefits which they will get through this initiative. (Souderton, and Reed, 1994)
Farmers will also maintain the essential character of the EUs countryside. You will find that through the starting of the CAP reform, it will lead to a sustainable development in the EU countries through the increased agricultural production. Due to globalization, our farmers will be in a position to get the largest share in the world market since with the CAP reform; the farmers will be protected meaning that they will compete effectively with the other farmers. The small-scale farmers will also compete well with the large-scale farmers in they will get the needed credits and incentives that will encourage them to produce just like the large-scale farmers. In return, you will find that the EU economy will have increased through this initiative. (Baldwin and Wyplosz, 2004)
Meeting future challenges
The CAP reform will have some key elements which are so much different from the rest of the agricultural policies. It is through the CAP reform that most of the trade will become simpler and also less trade-distorting. The introduction of a single payment scheme is one of the key elements of the CAP reform for EU farmers. You will find that the introduction of the single payment scheme will be very much different from the production since this will be most appropriate in that most of the member countries will not avoid the abandonment of most of their production. It is through the introduction of the single payment scheme that most of the farmers will have increased production since payment will be independent from their production. The single payment scheme in this case will replace most of the direct payments to most of the farmers. You find that earlier, there was the linking of the farmer’s payment to what they produce. This is one of the bad policies since most of the farmers were paid as per what they produced.
But with the introduction of the CAP reform, you will find that most of the small farmers will benefit since there will be no linkage of the farmer’s payments with what they produce. In simpler words, it will be decoupled. Here it means that the payment of the farmers will largely depend on the direct aids the farmers received in a reference period that is from a period from 2000-2002. This is one of the good initiatives in that you will find that with the single payment scheme, most of the EU farmers will tend to become more market oriented in the sense that they will tend to release their entrepreneurial potentials at its highest. As a result the farmers will also benefit from the increased profits which will help them top increase their standards of living.
You will also find that the linking of the single payment with respect to the food, environment, plant and animal health will lead to a good agriculture with the necessary conditions for the farmers to do their farming activities effectively. Continued land management will also be encouraged in that you will find that most of the EU beneficiaries of these direct payments will be forced to keep most of their agricultural land in good conditions and the environmental conditions will also be maintained hence leading to the increased production by these farmers. This is because those farmers who do not live as per the standards often CAP reform will face a reduction in their direct payments. So you will find that since most of the beneficiaries due to the fear of getting reduced payments, they will keep most of the land in such a good agricultural and environmental condition hence leading to increased economic growth in the EU countries. (Baldwin, and Wyplosz 2004)
Another key element is the issue of strengthening the rural development policy. You find that most of the rural farmers have been neglected so much. But you will find that CAP reform will assist the rural farmers to practice their farming. It is through this that the rural development in this case will increase hence leading to equitable development in the EU countries. Also you will find that the shift of the EU money plus the introduction of the new measures to promote the environment, quality and animal welfare will also help most of the EU farmers to meet the EU standards hence be in a position to compete internationally. There will also be a reduction in the direct payments and this is from the bigger farms and this is in order to finance the rural development policy. (Pelkmans, J2006).
The priority issues
Cap has set the priority issues which while help this policy to work effectively.
- To re-examine and also to specify the requirements of cross-compliance rules which are said to be more concerned with food regulation.
- Working on the more flexible decision-making procedures which are geared to the rural development which will help most of the member countries to have a good plan for their rural development.
- Reviewing the CAP reporting requirements for its implementation.
- Simplifying the legal framework in most of the communities of the EU member countries so that they can have an organization of their supply chain hence making it so easy for the farmers to trade so easily.
- Have a greater control of the agricultural sector as long as their efficiency is ensured
Arguments against CAP reform
The consumer price index is one of the challenges which most of the consumer will experience as a result of the CAP reform. This is because the policy states that there will be a fall in the consumer prices but the fall in the consumer prices of the agricultural products which in this case will have occurred as a result of the CAP initiative is seen to generate a reduction in the aggregate agricultural price index hence this means that it will eventually translate a drop of the world prices hence leading to losses to the farmers. You also find that most of the consumers and the other large-scale farmers will be highly taxed so that they can fund the small-scale sector hence these people will tend to be discouraged to work more due to the high taxes which are levied on them. (Pelkmans, J2006).
Conclusion
CAP should be reformed since we have seen that it is one of the policies which will make most of the EU farmers to see a change in the agricultural sectors through the many benefits which CAP will give to its farmers. So you will find that if CAP is reformed, most of the farmers especially the small-scale farmers will have increased production through the many incentives which they get from this initiative.
Reference
Pelkmans, J 2006, European Integration: Methods and Economic Analysis, 3rd ed. Pearson. (At the time of writing, the exact publication date of this 3rd edition had not been confirmed).
Baldwin, R. and C. Wyplosz 2004, The Economics of European Integration. McGraw Hill.
El-Agraa, A 2004, The European Union: Economics and Policies, 7th edition. Prentice Hall.
Hit iris, T 2003, European Union Economics, 5th edition. FT Prentice Hall.
McDonald, F 2005, European Economic Integration, 4th edition. FT Prentice Hall. (This is especially useful for part of the EMU lectures).
Barnes, I 1995, The Enlarged European Union. Longman. (This is a good lower level text).
Artis, M. and Nixon F 2001, The Economics of the European Union, 31C ed. Oxford.
Neal, L. and Barbezat D 1998, The Economics of the European Union and the Economies of Europe. Oxford.
Hansen, J 2001, European Integration: An Economic Perspective. Oxford. (This is an excellent book but is more advanced and technical than the others and only covers some topics).
Aggarwal, V. K. and Fogarty, A 2004, EU Trade Strategies: Between Regionalism and Globalism. Palgrave.
Petersmann, E and Pollack, M 2003, Transatlantic Trade Disputes: The EU, the US, and the WTO. Oxford University Press.
Souderton, B. and Reed, G 1994, International Economics, 3rd ediUon. Macmillan.
EMU de Grauwe, P 2005, Economics of Monetary Union, 6tedWon. Oxford.