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Theme 7. Agricultural|farin| policy|politics| of the EU

7.1. Necessity and special approach to agricultural|farin| policy of the EU

7.2. Principles and mechanism of agricultural|farin| policy|politics| of the EU

7.1. Necessity and special approach to agricultural|farin| policy of the EU

Agriculture and forestry, as major land users, play a key role in determining the health of rural economies as well as the rural landscape. Though agriculture may be less important to the economies of rural areas than it used to be, it still has a valuable contribution to make to their economic growth and environmental sustainability.

Farmers perform many different functions ranging from food and fibre production to countryside management, nature conservation, and tourism. Farming can thus be described as having multiple functions.

• Europe has a modern and competitive farming sector occupying a leading position on world markets, both as a major exporter and the world’s largest importer of food, mainly from developing countries;

• it has a sustainable, efficient farming sector, which uses safe, clean, environmentally-friendly production methods providing quality products to meet consumers’ demands;

• the EU farming sector serves rural communities, reflecting their rich tradition and diversity; its role is not only to produce food but also to guarantee the survival of the countryside as a place to live, work and visit;

• Europe’s agricultural policy is determined at EU level by the governments of Member States and operated by the Member States. It involves support for farmers’ incomes while also encouraging them to produce high quality products demanded by the market and encouraging them to develop additional ways of improving their businesses in harmony with the environment.

The EU has a particular model of agriculture that responds to the requirements of civil society – in terms of their expectations on food production, food safety, environmental standards and conservation of the rural environment, relations with the developing world (agricultural trade) and value for money for their taxes.

The CAP is the vehicle that delivers this. It has been a long march from support for over-production to a market-oriented, environmentally-friendly system. But this ‘green evolution’ will continue.

Today's CAP is a policy choice of the European society. Few can imagine what the EU’s countryside and food heritage would be like without it. The support of consumers, taxpayers and society is needed to prevent the risk of land abandonment, degradation of the rural environment, loss of employment and even the decline of the social fabric of many of our rural areas. In addition, the CAP and other EU policies have led to the creation of a large single market in agricultural goods in the EU and have helped the EU to become a major world player in agriculture and food terms.

Agriculture sat high on the agenda of European policymakers, especially at the time when the Treaty of Rome was being negotiated. The memory of post-war food shortages was still vivid and thus agriculture constituted a key element from the outset of the European Community.

The Treaty of Rome defined the general objectives of a common agricultural policy. The principles of the Common Agricultural Policy (CAP) were set out at the Stresa Conference in July 1958. In 1960, the CAP mechanisms were adopted by the six founding Member States and two years later, in 1962, the CAP came into force.

The Common Agricultural Policy (CAP) is comprised of a set of rules and mechanisms, which regulate the production, trade and processing of agricultural products in the European Union (EU), with attention being focused increasingly on rural development.

Among the European Union's policies, the CAP is regarded as one of the most important policy areas. Not only because of its share of the EU budget (almost 50%, decreasing over the years), the vast number of people and the extent of the territory directly affected, but also because of its symbolic significance, and the extent of sovereignty transferred from the national to the European level. The significance of the CAP, nowadays, is also portrayed by the fact that it is directly related to the Single Market and the EMU, two key areas in achieving the European integration.

The objectives of the CAP accordingly to the EC Treaty are:

to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;
to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;
to stabilise markets;
to assure the availability of supplies;
to ensure that supplies reach consumers at reasonable prices.

In order to attain these objectives, the EC Treaty provides for the creation of the common organisation of the agricultural markets (COM) which, depending on the product, shall take one of the following forms:

common rules on competition;
compulsory co-ordination of the various national market organisations;
a European market organisation.

The COMs were introduced gradually and now exist for most EU agricultural products. They are the basic instruments of the common agricultural market in as far as they eliminate the obstacles to the intra-Union trade of agricultural products and maintain a common customs barrier with respect to third countries.

For self preparation: COMs by 3 products (on individual choice)

7.2. Principles and mechanism of agricultural|farin| policy|politics| of the EU

Three main principles, defined in 1962, characterise the common agricultural market and thus the COMs:

a unified market: this denotes the free movement of agricultural products within the area of the Member States; for the organisation of the unified market, common means and mechanisms should be used throughout the EU;
Community preference: this means that EU agricultural products are given preference and a price advantage over imported products; also, the protection of the internal market from products imported from third countries at low prices and from considerable fluctuations in the world market;
financial solidarity: all expenses and spending which result from the application of the CAP are borne by the Community budget.

The institutional providing of common agricultural policy of the EU meanslegislative bases of general agricultural policy of the EU, which are fastened in EC Treaty.

Article 2

Article 3

.....

å) common policy|politics| in the spheres of agriculture and fishing|piscary|;

Section|division| 2. Agriculture and fishing|piscary|

Article 32

Article 33

â) to stabilize markets;

ã) to provide|secure| the presence of food;

ä) to provide|secure| clever consumer prices|shedrod| on food.

á) necessity of gradual realization of the proper changes|changing|;

â) close intercommunication|relationship| of agriculture is with all of economy of countries-members|limb|.

Article 34

1. For achievement of aims, contained in the article 33, the general|common| organizational mechanism of agricultural|farin| markets will be created.

3. For that, to enable joint organization, to foreseen in a paragraph 1, to attain the aims, one or a few|a little| funds of management and guarantees|warrantly| of agriculture can be created.

Article 35

Article 36

b) within the framework of the programs of economic|economical| development.

Article 37

3. In decision of Advice, to accepted skilled|skillful| majority and in accordance with|according to| a paragraph 2, can be substituted for national organizations of market joint organization, foreseen in the article 34(1), if:

Article 38

The system of support of prices|shedrod| at the market of agricultural product of the EU

System of support of prices at the market of agricultural product of the EU isa supranational (state) policy on adjusting of market of agricultural product, which, as a rule, assumes using of a number of mechanisms and instruments. Consolidation of limits is on a production as a result of existent tailings, greater openness of markets and reduction of subsidizing of export in obedience to the Treaty of Uruguayan of round resulted in the origin of antihunt mechanisms in a sector after a sector.

Setting down of the assured price (also indicative price; to 1995 - target price; basic price, guide price) is a price which according to the COM agricultural producers get at the volume of produced products under certain limits and certain quality, is used for adjusting of volumes of commodity at the market and to prevention of its overproduction by decreasing or removal of help at the exceeded quotas.

The main sense of the assured price is to be orient for producers and a base for calculation of all of other parameters. Market prices on grain hesitate between intervention (lower limit) and assured (top limit).

Below level of the assured price an intervention price is set. Its setting consists in that, to retain a price at the internal market higher certain level. At first having a special purpose and intervention prices differed on the size of transport charges deliveries of grain from Ormer in Duisburg. As soon as a price on grain on the markets of the EU falls below intervention, on all of territory of European Union intervention agencies which obtain the products of farmers at price of intervention are opened. Farther these agencies keep the accumulated supplies or with a loss export to the oversea markets. Thus, an intervention price becomes the lower limit of market price variations at the European market. In relation to fruit and vegetables which can not be kept long, there are costs of exception, below which the groups of producers, operating as intervention organizations, halt a sale and send superfluous products to the production of alcohol, eleemosynary necessities, or on elimination, while diminishing of suggestion will not promote a price on this products.

However for support of internal price at desired level one this mechanism not enough. In an order to shut out brought in to the internal market of more cheap imported products, another mechanism - limit price (threshold price) (on grain-growing, sugar, milk products, olive oil) is inculcated, sometimes it is named also the minimum imported price; or sluice price (sluice-gate price) on pork, eggs and meat of poultries; recommended price (reference price) is set down- for fruit, vegetables and wine. These price are determined as prices assured except for charges on transportation from basic port of import of product to the basic place of its consumption. For grain Duysburg is select a basic consuming area, and basic port of import is consider Rotterdam (Netherlands).

Setting of limit price - to serve as a base for the calculation of the variable imported tariff which settles accounts as a difference between a limit price and world price. In same queue, a world price is determined as the minimum imported price (including charges on insurance and freight, that cost of SIR) which a product was supplied on through the limits of the EU in port of Rotterdam during set time. A world price is one of the most difficult elements of these calculations, it is determined after six basic categories of grain twice on a month and corrected on quality and port of delivery. Accordingly, a limit price and imported tariff also settled accounts twice on a month.

For commodities in relation to which exists the assured price is certain, the maximum is determined in a method, that the cost of sale of the imported commodity (taking into account transport charges) equalled this assured price. For commodities which the assured price does not exist (fruit and green-stuffs, table wine) for, minimum is the made to order price after which commodities can be imported from the third countries. In the case of failure to observe of requirements about the made to order price the imported commodities are assessed a tax.

Export subsidies (export restitutions) are directed on increasing of competitiveness of products of the EU on world markets. For their account due to a budget a difference is compensated producers between the internal prices of the European Union and prices of world market.

Common organization of markets of agricultural product

Common organization of markets of agricultural product have a legal framework identified in EC Treaty. Within the framework CAP legal framework of policy of adjusting of markets is fastened the Article 32(38), where regulative bases of joint organization of markets of agricultural product are stopped up.

Common organization of markets the based on three main|head| principles:

Market unity (and unified market) means that agricultural commodities move within the limits of the EU on those terms which exist on national markets, that quantitative limitations of trade, duty, taxes and other measures which have an equivalent action, are anniented. Market unity foresees forming of the unique prices on an agricultural product in all of the EU (see The system of support of prices is at the market of agricultural product of the EU).

Giving of advantage the commodities of Community (community preference) means that, advantage gives oneself up commodities, to mined-out in Community before imported. It is done for protecting of common market from a cheap import and from oscillation of world prices. This principle will be realized by the imported and export measures. the EU tries to approach prices on the imported commodities to the level those which operate at the common market. A difference between a world and assured in the EU price was before covered the variable imported collections, which, after the Uruguayan round of GATT, were gradually transferable the fixed custom collections. Through collections from an import, prices on the imported commodities arrive at the standard of internal prices, and that is why it is not advantageous to buy commodities the European point-of-sale enterprises for the EU, consequently, they give advantage the commodities of Community.

Financial solidarity (financial solidarity) is arrived at by the European fund of agricultural guarantees and European agricultural growth of rural territories which were created after disbandment in 2007 fund European agricultural fund of management and guarantees (See the European agricultural fund of management and guarantees). Principle means that entire countries-members carry responsibility for the financial consequences of general agricultural policy. All of charges, necessary for joint organization of markets covered from the European fund of agricultural guarantees.

· 73 % for guaranteeing of profits|acuests| to the farmers (direct help);

· 6,5 % as measures|step|, for stabilizing of markets;

· 4 % for a help users|consumer|;

· 4 % for a help in treatment and marketing;

COMs with the assured prices (guaranteed prices) and automatic intervention. Behave to sugar and to dairy products, and influence only on one fifth eventual production of the EU (Community of final production). Minimum or assured prices are paid farmers public intervention agencies in an exchange on supplying with their products, where market prices are too low. This type of COM, which to 1992 most characterized SSP, is consistently abbreviated

COMs with the assured prices (guaranteed prices) and conditional intervention. Behave to wine, pork and some fresh fruit and green-stuffs, and influence approximately on one fifth eventual production of the EU. The chart of the assured prices is used, only in the cases of serious crisis at the market. European Commission decides or exists such crisis.

Mixed COMs with assured prices and direct payments for additional production. Behave to the breadstuffs, rice, mutton, bananas, milk (from 2005-6) and beef (but from 2002 the chart of conditional intervention will be involved with the «system of support»). This category makes the one third eventual agricultural production of the EU and grew from the moment of acceptance of package of reforms of SSP in 1992-1999

COMs only with a direct help to the producers. Direct help producers get in obedience to a general tariff rate, whether proportionally mined-out amount of products or productivity. These COMs behave to the seed of oil-bearing cultures, albuminous cultures, forage, to the tobacco, textile, pea and bobs, products of processing from fruit and green-stuffs, some fresh fruit and green-stuffs (nuts), olive oil and olives, and cover about 10 % eventual production of the EU.

COMs without direct production support. Behave to poultry, to the eggs, agricultural products of processing, flowers and plants, some fresh fruit and green-stuffs, potato and other products of exotic things (squeals, high-quality wines, coffees, tea, et cetera). These products get custom defence only.

In obedience to the last reforms COMs exists 4 coexisting|coexists| mechanism for control production volumes:

1. Production quotas as such (Production of quotas as such)
Quotas which are set at national level for milk and sugar and appointed farmers or enterprises. Producers which exceed the set quotas in every country-member of are under penalty approvals.

2. Production quotas are nationally assured (National of guaranteed production quotas). These quotas (an amount is maximally assured, Maximum Guaranteed Quantities (MGQ), Maximum Guaranteed Areas - MGA - and premiums per head of cattle) are set on many products and is equivalent to direct payments of producers, abbreviated proportionally if threshold values (guaranteed threshold of production) are exceeded. Yes, if a production exceeded the maximally assured amount, economies were assessed fines in form additional tax of general responsibility in a size 1,5%, and also diminishing of the assured price was inculcated next year on 3%. An initial tax in 1,5% returned fully or partly, when an actual production was below the maximally assured amount on a certain percent.

3. Production quotas are assured at the level of the EU (Guaranteed of production quotas at of Community of level). These quotas which settle accounts on the basis of general production for the EU were anniented and on the modern stage they are utillized only for the products of processing from fruit and green-stuffs, bananas.

4. National quotas are for surpluses (National of quotas for surpluses). These quotas are set on the Mediterranean products (wine, using approved distillation volumes) and some fruit and green-stuffs (utillizing threshold values for the exception of products from a market).

European Agricultural Guidance and Guarantee Fund (EAGGF)

The CAP is financed from the European Agricultural Guidance and Guarantee Fund (EAGGF), which accounts for a substantial part of the Community budget. The EAGGF was set up in 1962 and separated in two sections in 1964:

the Guidance Section, one of the structural funds, which contributes to the structural reforms in agriculture and the development of rural areas (e.g. investing in new equipment and technology);
the Guarantee Section, which funds expenditure concerning the common organisation of the markets (e.g. to buy or store surplus and to encourage agricultural exports).

The Guarantee Section is by far the more important one and is classified as compulsory expenditure within the Community budget. The Guidance Section is one of the structural funds aimed at promoting regional development and reducing disparities between areas in Europe.

The Commission has proposed the simplification of the funding system through the creation of a single instrument for funding and programming: the European Agricultural Fund for Rural Development (EAFRD). This proposal would include increased Community funding.

The CAP has evolved considerably since its creation, as has the rural development policy. From 2006, this policy will aim to:

· make agriculture more competitive through restructuring and measures such as investment aid for young farmers, more information, etc.;

· improve the environment and the countryside through support for land management, by including rural development in “Natura 2000” sites: agri-environment, forestry, etc.;

· improve quality of life in the countryside and diversify economic activity, e.g. by focusing on food quality.

The Common Agricultural Policy has been the biggest, the most contentious and the one with the largest budget of all the Union's policy areas. The EU has more power in agricultural policy than it has in any other policy area and it has passed more legislation on agriculture than in any other single policy area.

The number of farmers and the cultivated area of the EU has grown considerably with the accession of the ten new Member States. The EU now includes some 11 million farmers. With enlargement, farm land has increased by around 30%.

Rural Development policy 2007-2013

On 20 February 2006 the Agriculture Council adopted EU strategic guidelines for rural development - five months after the adoption of the Council Regulation on support for rural development by the new European Agricultural Fund for Rural Development (EAFRD).

These guidelines set out a strategic approach and a range of options which Member States could use in their national strategy plans and Rural Development programmes.

Since the reform of the Common Agricultural Policy, Rural Development is playing an increasingly important role in helping rural areas to meet the economic, social and environmental challenges of the 21^st century. Rural areas make up 90 percent of the territory of the enlarged EU and the new legal framework points more clearly to the direction of boosting growth and creating jobs in rural areas – in line with the Lisbon Strategy – and improving sustainability – in line with the Göteborg sustainability goals.

The future Rural Development policy 2007-2013 will focus on three areas in line with the three thematic axes laid down in the new rural development regulation: improving competitiveness for farming and forestry; environment and countryside; improving quality of life and diversification of the rural economy. A fourth axis called "Leader axis" based on experience with the Leader Community Initiatives introduces possibilities for locally based bottom-up approaches to rural development.

The new programming period provides a unique opportunity to refocus support from the new rural development fund on growth, jobs and sustainability.

The European legal framework being established Member States can now elaborate their national strategy plans and rural development programmes before submitting them to the European Commission.

For each set of priorities, the EU strategic guidelines are suggesting key actions. Member States shall prepare their national rural development strategies on the basis of six community strategic guidelines, which will help to:

· identify the areas where the use of EU support for rural development creates the most value added at EU level;

· make the link with the main EU priorities (Lisbon, Göteborg)

· ensure consistency with other EU policies, in particular cohesion and environment;

· accompany the implementation of the new market orientated CAP and the necessary restructuring it will entail in the old and new Member States.

The six strategic guidelines are:

1. Improving the competitiveness of the agricultural and forestry sectors

2. Improving the environment and the countryside

3. Improving the quality of life in rural areas and encouraging diversification

4. Building Local Capacity for Employment and Diversification

5. Translating priorities into programmes

6. Complementarity between Community Instruments

For self preparation:

1) CAP stages: Чернега О.Б. Промислова і сільськогосподарська політика ЄС [Текст]: навч. посіб./ О.Б. Чернега, В.С. Білозубенко. – Донецьк: ДонНУЕТ, 2009. – 250 с.

2) Green Pool : Довідник з європейської інтеграції [Текст]: навч. посібник / під ред.. О.Б. Чернеги. – Донецьк [ДонНУЕТ], 2010. – 310 с.

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