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Impact of CAP reform on developing countries

15 April 2013

According to a blog posting by Professor Alan Matthews of Trinity College Dublin on the website CAP Reform.eu, development issues have been less prominent in the current round of CAP discussions than in previous rounds. This is attributed to the fact that “EU agricultural policy now has a much less significant impact compared to other issues and policies affecting food production and food security in developing countries.” The changing global food context, notably “higher world food prices” and “low reserve stocks leading to greater price volatility”, are now of growing concern to developing countries.

Professor Matthews comments that “the current CAP reform deals mainly with the level and structure of decoupled direct payments where the development perspective is not very prominent.” He acknowledges that “although these payments undoubtedly have a production impact, the size of this impact is much less than the impact of trade barriers.”

The article argues that “from a development perspective, the action on the CAP has moved more towards trade policy,” but that, with the ‘Everything But Arms’ agreement and the granting of duty-free, quota-free access to ACP countries that have initialled EPAs, “EU agricultural barriers are no longer relevant” for most ACP and LDC countries. In addition, it is noted that export subsidies are now far less extensively used. For example, in January 2013 it was announced that export subsidies would no longer be provided on poultry meat for destinations beyond North Africa.

It is argued that growing differentiation in trade treatment for developing countries makes it much more difficult to identify a common ‘development’ interest across developing countries. This makes it “impossible to design a CAP that only has positive effects on developing countries”.

This, it is noted, has led critics to focus on “alleged [policy] incoherence arising from agricultural trade flows”. However, the implicit focus on food self-sufficiency policies is held to be “both inconsistent and inefficient” and “would be disastrous for global food security”. It is pointed out that “trade allows millions of farmers everywhere… to enjoy higher incomes and thus greater food security than would otherwise be the case.” However, policies that move beyond simple protectionism are needed to manage the distributional effects of trade.

The article notes that since the EU is “the most important single player in global agricultural trade”, EU policies undoubtedly have an effect on developing countries. However, these effects are diverse and country-specific. For this reason, it is maintained that a system of ongoing monitoring of the external effects of the CAP is required.

Four options for monitoring are advanced:

  • monitoring mechanism with objectives for process and results enshrined in the legal regulations of the CAP;
  • monitoring mechanism without specific objectives enshrined in legal regulations;
  • more general EU-led monitoring mechanism covering all EU policies likely to affect outcomes in developing countries;
  • monitoring undertaken by secondary stakeholders, building on the EC-convened Advisory Group on International Aspects of the CAP.

Editorial comment

The impact of CAP policy tools varies from country to country, and from sector to sector. The CAP reform process nevertheless has an impact at several levels. One level commonly neglected is the impact on EU corporate strategies. In the sugar sector, reform gave rise to a global expansion of the operations of certain EU sugar companies, and this has transformed the basis of ACP–EU sugar sector relations. A similar process is now under way in the dairy sector, with the prospect of expanded milk volumes in some member states linked to quota abolition, leading to a refocusing of corporate strategies on overseas markets, including in some instances African markets (see Agritrade interview ‘ A Danish perspective on investment in African dairy sector development’, 24 February 2013).

These developments are intimately linked to processes of CAP reform and give rise to new challenges. Internally the EC is developing new policy tools to meet these new challenges. Most notable in this regard are EC policy initiatives to strengthen the functioning of supply chains and mitigate unfair trading practices arising from power imbalances along supply chains (see Agritrade article ‘ Report on improving functioning of food supply chain released’, 11 March 2013). Some of these new policy initiatives are potentially of relevance to the management of ACP–EU agricultural trade relations in the new post-preference era.

Other EU policy tools to deal with price volatility, namely the proposed expanded safety net policy, also potentially carry external implications that need to be monitored on a case-by-case basis.

Taken together, this constitutes a substantial agenda for monitoring the external consequences of the ongoing processes of CAP reform, as the effects work through the real world of trade and investment relationships.


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