Common Agricultural Policy: Evolution and Economic Costs

The inception of the common market was catalysed by a nucleus of western European countries’ wishing to create a political and economic union following the resolution of the Second World War. From this ideology, the Common Agricultural Policy (CAP) was born, targeted at curing balance of payments and food shortage problems from the war effort and offering the benefits of further political integration. However, in laying these foundations, there was a failure to recognise potential improvements in supply responsiveness and efficiency in agriculture. Moreover, in seeking to cement the European Economic Community (EEC) by striking a deal in agriculture, farm ministers took the decision to set agricultural prices for cereals some 50 percent in excess of what was then a stable world price. As Hubbard and Ritson (1997) observe, ‘because most other agricultural products are related to cereals, either as competitive arable crops or as users of cereal based feeding stuffs, most other agricultural product prices had similarly to be set at relatively high levels’ (p. 81).