Transcript The Common Agricultural Policy

T HE C OMMON A GRICULTURAL
P OLICY
Impact on International Trade
29th November 2009
European Economic Integration, Institute of economic studies
E XPORT
SUBSIDIES
I MPACT ON INTERNATIONAL
TRADE
 Lower
export
subsidies
 Higher
direct
payments
I MPACT ON INTERNATIONAL
TRADE

EU prices closer to world prices

International agricultural trade liberalization

Fall in cereal prices by 50%

Fall in income of African countries, which were
making profits on selling goods to Europe (under
Lomé convention)

An increase in the export price competitiveness
of basic EU food and agricultural exports for
African countries
F URTHER

The Agenda 2000


“multi-functionality” of farming activities
The reform in 2003


REFORMS
A reduction in direct payments for bigger farms
to finance the new rural development policy
CAP “Health Check“ 2008

Increase of milk quotas, ...
„CAP
VS .

African exporters seem to be
sensitive to EU reforms

Pros and cons of CAP reforms
(from African point of view)

Future prospects
A FRICA“
CASE
P ROS
+

Large food surpluses exported
to Africa as a food aid (before
Mac Sharry)

Certain African (sugar) exporters
profited from Lomé convention
(€500 mil. in 99/2000)
AND
C ONS
—

2001: free access to the market
granted to the least developed
countries under „Everything Buts
Arms“ initiative.

Problem? – sugar, rice and bananas
excluded

After Mac Sharry reform, EU price
reductions drove some African
exporters out of the EU market

Undermining of African markets by
price-competitive EU goods (wheat)
– „markets of last resort“

EU policy emphasis shift – „from
quantity to quality“
S ITUATION WHEN A FRICA
REJECTS TO TRADE WITH EU
higher value food
Africa
Qh
PPF
Ql
lower value food
T RADING SITUATION
R ICARDIAN

MODEL
Africa has comparative advantage in producing
lower value food
Africa
EU
QH
QH
PFT
TT
TT
CFT
higher value food
higher value food
PA = CA
IFT
PPF
IA
CFT
IFT
IA
PFT
lower value food
PPF
PA = CA
Ql
lower value food
QH
F UTURE

African exporters:


PROSPECT
lower value food and agricultural products
distributors
European exporters:

higher value food and agricultural products
C ONCLUSION

Trend in reforms of CAP – lower direct payments

Decoupling:

↑ economic prosperity

↓ negative impacts on the environment

From import levy to direct subsidies – before and
after Mac Sharry reform

Africa has to trade with lower value food
Petra Andrlíková
Radovan Parrák
REFERENCES

Institure for Agriculture and Trade Policy: The
Common Agricultural Policy: A Brief Introduction,
Prepared for the Global Dialogue Meeting (May 14 and 15, 2007,
Washington, D.C.)

European Economic Policies: Common
Agricultural Policy; Laurent Weill: Université de Strasbourg,
Charles University - Prague , April 2009

Policy Notes 2009/7: The Impact of Common
Agricultural Policy (CAP): Reformon Africa-EU Trade in Food
and Agricultural Products

http://ec.europa.eu/budget/index_en.htm