Edited by Joseph A. McMahon and Michael N. Cardwell
Chapter 3: The Single Common Market Organization Regulation
The Common Agricultural Policy (CAP), which is one of the oldest common policies of the European Union (EU), has seen important changes over the last decades and has been moving away from a production and intervention focused policy towards more market orientation, against a background of a more integrated and liberalized world economy. Farm subsidies have now become largely decoupled from production. Export refunds as an instrument of market support have de facto been abolished, at least in the absence of market turbulence. Overall financial support for the agricultural sector has decreased significantly and a large amount of available funding is now dedicated to the development of rural areas, under the CAP’s rural development policy. The introduction of production-limiting mechanisms, such as quotas for the sugar and the dairy sectors or plantation restrictions for vines, helped to reduce agricultural surpluses, in combination with the effect of high global food prices. Market surpluses are now much less frequent and largely limited to specific sectors. Prices for agricultural commodities have at the same time become more volatile, occasionally causing considerable hardship for agricultural producers. Sudden drops in prices are not necessarily reflected in lower food prices for final consumers.
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