Europe’s disastrous Common Agricultural Policy (C.A.P.)

While Europe appears to be slowly freeing up business concerns and even lowering taxes, the agricultural sector still enjoys market-distorting protectionism that costs consumers dearly. The system is known as the Common Agricultural Policy (C.A.P.), which consists of a complex web of import tariffs, price supports, export subsidies and direct payments to farmers.

Critics charge that the C.A.P. has become perhaps the single greatest obstacle to global free trade.

Here are just a few of its devastating effects:

Price supports have encouraged rampant over-farming – to the extent that farmers were irrigating their crops with excess milk by the late 1980s.

Even farmers can become C.A.P. victims – witness the fact that the average value of French farmland fell by two-thirds between 1975 and 1995.

Last year the European Union devoted $42 billion to farm subsidies – just under half its total budget.

But the effects are global, with experts estimating that C.A.P. imposes annual costs of $75 billion worldwide – due to resource misallocation and missed trading opportunities.

It is estimated that C.A.P. policies cost a European family of four an extra $1,200 in higher taxes and grocery prices.

But once countries embark on the slippery slope of agricultural subsidies and farm-sector protections, saner policies are nearly impossible to implement. C.A.P. has so far withstood seven attempts at meaningful reform.

Source: Bret Stephens, "Europe Goes Free Market, but Agriculture Remains Behind," Wall Street Journal, August 10, 2000.

For text (WSJ subscription)
http://interactive.wsj.com/archive/SB965875193485009250.htm

For more on European Union
http://www.ncpa.org/pi/internat/intdex9.html