The common agricultural policy

Date of publication: June 15, 1994

Abstract:

This paper examines the impact of the GATT agreement and concludes that its direct impact will be minimal. More important is the establishment of a framework that will serve as a basis for GATT Mark II for agriculture from 2003. The current GATT will be used more as a lever to achieve changes to the current, and recently reformed, Common Agricultural Policy (CAP). The main driver of future political change will be the EC farm budget for which a homing crisis beckons, in the arable sector the main policy instruments of set-aside, direct aid and declining intervention and export restitution, will remain. The only way to overcome the budget problem will be to increase set-aside, reduce compensation payments or do both. However such demands by the EC Commission will be ’bought off by a substantial increase in support for industrial crop use. The overall impact on the agricultural industry will be an acceleration of farm structure change with concentration into fewer larger units to realise the savings in fixed costs. The farm input markets will decline and become even more aggressive, yet at the same time more 'accessible' for those who want to take innovative approaches to the distribution challenge. Despite the policy interventions there will be a surviving EC agriculture at the end of the decade, albeit as a 'leaner meaner machine'. Those who can bring new technology to the market and use the very best in marketing will have an exciting future.

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