Common Agricultural Policy

System of financial support for farmers in European Union (EU) countries, a central aspect of which is the guarantee of minimum prices for part of what they produce. The objectives of the CAP were outlined in the Treaties of Rome (1957): to increase agricultural productivity, to provide a fair standard of living for farmers and their employees, to stabilize markets, and to assure the availability of supply at a price that was reasonable to the consumer. The CAP has been criticized for its role in creating overproduction, and consequent environmental damage, and for the high price of food subsidies.

History
The policy, applied to most types of agricultural product, was evolved and introduced between 1962 and 1967, but was later amended to take account of changing conditions and the entry of additional member states. At the heart of the CAP is a price support system based on setting a target price for a commodity, imposing a levy on cheaper imports, and intervening to buy produce at a predetermined level to maintain the stability of the internal market. When the CAP was devised, the six member states were net importers of most essential agricultural products, and the intervention mechanism was aimed at smoothing out occasional surpluses caused by an unusually productive season. However, the CAP became extremely expensive in the 1970s and 1980s due to overproduction of those agricultural products that were subsidized. In many years, far more was produced than could be sold and it had to be stored, creating ‘mountains’ and ‘lakes’ of produce. This put the CAP under intense financial and political strain, and led to reforms in the 1990s that substantially replaced guaranteed prices with compensation to farmers if prices fell. The CAP remains one of the most important EU policies, with agricultural expenditure accounting for half of the 90 billion euros allocated towards the annual budget of the European Community in 2002.