Common Agricultural Policy in Ireland

Agricultural Policy: What has been the impact of reforms of the CAP on Irish Agriculture since the McSharry reforms and what are the options for Irish Agriculture and rural development in the future?

Introduction

Ireland joined the EEC in 1973; Ireland's economy including agriculture got a major boost after joining the EEC. When Ireland joined the EEC, the agriculture sector was given supports. This scheme was called the Common Agricultural Policy. The Common Agricultural Policy (CAP) was introduced in 1962 with the primary aim of improving the living standards of farmers within the EEC member states. As a result of these supports farmers including the Irish started to over produce. This led to the CAP reforms. This assignment will examine in detail the impact of the CAP and the McSharry, Agenda 2000 and The Luxembourg Agreement reforms. The impacts looked at will be mainly in the dairy and beef industry.

Looking then towards the future of Irish agriculture and rural development in Ireland, I will talk mainly about the futures of the dairy and beef industry in Ireland. Coming from a farming background, I will give an in depth look into the future of the dairy and beef sectors in Ireland, the issues facing them and how they can over come these issues and survive, not only in today's market but into the future. Throughout the assignment I will be looking at information gathered, written and discussed from various sources, and then provide my own opinion on the issue and also the opinions of some practicing farmers in the sector on how the reforms of CAP has affected them and how they think farming in Ireland will evolve in the future.

The Early Days

The European Economic Community (EEC) was founded in 1957 after the signing of the Treaty of Rome. Its first members were Germany, France, Belgium, Luxembourg, The Netherlands and Italy. These countries were also members of the European Coal and Steel Community (ECSC), which had been established in 1951. The Common Agricultural Policy (CAP) was introduced in 1962 with the primary aim of improving the living standards of farmers within the EEC member states. It was originally a compromise among the six member states, with the following objectives set out under Article 39 of the Treaty of Rome:

* To ensure a fair standard of living for farmers and farming communities.

* To increase agricultural productivity.

* To stabilise markets.

* To assure availability of supplies. To ensure fair and reasonable food prices for consumers.

To incorporate these objectives, three main principals were set out which would shape the Common Agricultural Policy.

* Market Unity whereby there would be common prices across the EC and free trade in agricultural produce throughout EC member states.

* Community Preference, this put in place internal tariff barriers to protect member states from world markets.

* Financial Solidarity, which would finance common expenditures in the agricultural sector.

To establish a common market for agricultural produce, individual markets had to be organized for all agricultural products. These markets are known as Common Market Organisations. These common markets would allow free trade within EEC member states and erect trade barriers to outside markets. Instead of allowing the market to establish the prices for various products, the CAP put in place a guaranteed price. This meant that no matter how low the market price of the good dropped the EEC would protect the market by using a price support system. The price support system was a minimum price set by the civil servants. This was a very costly approach and encouraged farmers to produce as much as possible. Intervention agencies would step in a buy up the surplus.

For this to be successful, the CAP had to stop cheap imports coming in from world markets. To achieve this, a system of border tariffs was set up for each produce. This meant produce could only enter the EC market if the price was at or above the level agreed by Community civil servants. Also another policy was put in place to allow farmers export their produce and compete at world prices. They received an export subsidy which compensated them on the difference between the lower world price and the EC price. These standards were put in place to help support the second principal Community Preference.

The European Agricultural Guidance and Guarantee Fund (EAGGF) were established to cover the financing of the CAP. It consists of two parts, guidance and guarantee. The guidance part is responsible for funding socio-economic policies and the guarantee section covers costs involved with the market system. In the early days, the EAGGF accounted for almost the entire EC budget. It decreased dramatically since the early 1980's however, falling from 65.1 per cent of the total EC budget in 1986 to 53.8 per cent in the year 2000 .

The outcome of these principals and objectives set out by the CAP were very successful. It was deemed a political success in the early 1960s. But it soon began to pose problems. CAP operated so that the more farmers produced the more money they received. Productivity in the agricultural sector was booming, and EC was now very much self sufficient. Over production was now a real problem for the CAP, with so much produce being produced, consumers in the EC were not able to consume all the goods, world market prices were too low to export. So agricultural produce began to accumulate and the surpluses were bought up by the EC. These surpluses formed the infamous butter mountains and wine lakes. The main effects in the early days of the CAP were food secured but surpluses amounted, price was stable for producers but high for consumers and finally production methods improved but with that came environmental degradation and health worries. This now paved the way for the reforms to the CAP.

The beginning of the reforms

The EU decided to act quickly to prevent farmers from causing huge problems in the agricultural sectors, so they introduced a host of restrictions to try and contain levels of production for some basic products. The early reforms were aimed towards some specific sectors.

The Mansholt Plan

The earlier days of the CAP were dominated by Socio-structural policies and in 1968 the Mansholt Plan was launched with the ambitious aim of restructuring