The history of CAP
The first CAP came into force in 1962, when Europe’s society and the agriculture was damaged by the years of war. The emphasis of the early CAP was therefore on encouraging better agricultural productivity in order to ensure the supply of affordable food. The CAP offered subsidies and systems guaranteeing high prices to farmers, providing incentives for them to produce more. These market back-up measures, such as direct payments to producers, export refunds, support schemes and stockpiling, effectively protected farmers from the vagaries of the market. The first CAP paved the way for a model of capital-intensive family farming and moved the EU towards self-sufficiency.
More yields, more problems
By the 1970s, the success of the system was already apparent. Production soared. In some fields - like dairy - the point of self-sufficiency had been achieved and surpassed thanks to a crossover system whereby an intervention price was set (i.e. the farmer got paid a minimum per product, even though the market would offer him less), import taxes were levied and exports subsidized. This did not only lead to a lot of cheap food, the budgetary cost were very high and more importantly it led to production surplus which had to be destroyed or dumped on international markets. Furthermore its support of industrial-type production resulted in social and environmental problems, such as small producers abandoning the countryside, pollution and over-exploitation of natural resources.
Source: Agricultural Policy Perspectives Briefs, 2011 January
The first major reforms of the CAP were agreed to in 1992 as an outcome of a process highly influenced by international trade agreements that would later lead to the setting up of the World Trade Organisation (WTO) in 1995. The purpose of the second CAP was to reduce the wasteful practice of producing agricultural surpluses and to open up the European Union’s agriculture to world markets. Under successive waves of reform, the previous system of intervention prices and product-specific subsidies was gradually replaced by direct payments to farmers. This meant farmers would not be paid if they produced more and more and more, but rather on the basis of a non-changing quantity, such as the size of their land.
In 1999, it was recognized that food production should not be the only thing handled in the CAP. Environment, landscape protection and rural culture are also very much connected to everyday farmers practices. Therefore, the CAP was divided in two "pillars": the first pillar being the now decades old policy structure directed towards producing sufficient (and cheap) food, the second pillar was directed towards the new awareness of farmer responsibility.This meant that farmers now could receive payments for adopting extra agro-ecological practices in disadvantaged areas, or investing in rural infrastructure. It was dedicated to the development of rural areas and the multifunctionality of agricultural activity. Farmland is not only for food production, it is also nature and a place of recreation.
The most current reform (2003) decoupled direct support to producers; most contributions to producers were no longer directly linked to quantities produced, areas cultivated or number of animals raised. The last reform, the so-called "Health Check”, in 2008, further boosted the decoupling in the direct payment system, it also increased the resources allocated to the second pillar.