Reform of U.S. and EU Farm Policies: The Common Agricultural Policy (CAP)

Disagreements over agriculture policy-over who is more at fault when it comes to farm subsidies, tariffs, and export dumping-are a running-sore on the transatlantic relationship and an impediment to shared U.S.-European global economic leadership. As part of the Uruguay Round of the General Agreement on Tariffs and Trade (1986-1994), the European Union and the United States together agreed to subject their farm policies to multilateral trade disciplines. At the outset of Doha Round in 2001, it was well understood among World Trade Organization (WTO) members that, after decades of special treatment of the farm sector, the multilateral trade-liberalizing process would have to be extended in a meaningful way to agriculture in an effort to create a level playing field that would allow poor farmers in developing countries to compete on world markets.

Over the past several years, the German Marshall Fund has been actively engaged in debates around farm policy in both the United States and European Union. Following the recent disappointment of reform interests at the continuing direction of U.S. policy in the 2008 Farm Bill, the next major transatlantic policy opportunity concerning agriculture is in Europe. The European Commission has conducted a "Health Check" of the Common Agricultural Policy (CAP), and the ongoing budget review process will ultimately help determine how much the EU spends on farm subsidies-and therefore also on other priorities-as part of the next Financial Perspective, beginning in 2014.

The CAP has been at the heart of the European political and economic integration project since the late 1950s. Originally designed to increase agricultural productivity following post-war food shortages through a system of price supports, it worked too well. By the 1980s European farmers were producing more food than they could sell. To address the growing problem of surplus production, the EU introduced production control policies and began providing income support payments to farmers.   However, this led to global market distortions because it artificially reduced the prices of various agricultural commodities.  At the same time, food scares such as the outbreaks of foot and mouth disease and BSE have led European citizens to question an agriculture policy oriented toward intensification of production and to demand new measures to improve food safety, quality, and environmental protection. Furthermore, the long-term decline in the number of Europeans employed in farming has resulted in rural economies that are no longer primarily agricultural, creating new demands for more broadly based rural development policies.

Over time, the Common Agricultural Policy has become a political liability in terms of EU foreign economic policy and soft power influence. The EU, in order to be a credible international actor, must reconcile its current position as the world's largest importer and exporter of agricultural products with the role that it wants to play as a champion of global development. The German Marshall Fund's work on EU agricultural policy seeks to ensure that development and trade concerns are taken into account in debates on European farm policy.  GMF's activities focus on building capacity in Europe among civil society groups and journalists and informing the public debate on the future of the CAP by developing a strong body of information on the development implications of today's CAP and communicating this to European policymakers. At the same time, GMF seeks to advance understanding of ongoing reforms to the CAP on the other side of the Atlantic, where perceptions of European policies serve as the last best excuse for politicians in the United States to maintain controversial U.S. farm subsidies.