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© 1988 International Monetary Fund
Cataloging-in-Publication Data
The Common agricultural policy of the European Community: principles and consequences / by Julius Rosenblatt — [et al].— Washington, D.C.: International Monetary Fund [1988]
(Occasional paper, ISSN 0251-6365; no. 62)
“November 1988.”
1. Agriculture and state—European Economic Community countries. 2. Agriculture—Economic aspects—European Economic Community countries. 3. Produce trade—European Economic Community countries 4. Agriculture—Economic aspects—Germany (West) I. Rosenblatt, Julius II. Series: Occasional paper (International Monetary Fund); no. 62.
HD1920.5.Z8C65 1988
ISBN 1-55775-036-X
Price: US$7.50
(US$4.50 university libraries, faculty members, and students)
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Contents
Prefatory Note
I. Introduction and Conclusions
II. The Operation of the CAP
The Evolution of the Agricultural Sector
Origins and Principles of the CAP
The Institutional Setting
Public Expenditure on Agriculture
III. The Effects of the CAP on EC Member Countries
The Case of the Federal Republic of Germany
Other Evidence
Price Developments
Production and Consumption Balances
Trade
Stocks
Income and Employment
Financial and Economic Costs
Concluding Remarks
IV. The Effects of the CAP on the Rest of the World
The International Effects of the CAP
Effect on Prices, Trade, and Welfare
Effect on Price Stability
Concluding Remarks
V. The Approach to Reform
The Debate on Reform
The Early Stages
Recent Developments
Recent Measures of Reform
Price Restraint
The Agrimonetary Arrangements
Restrictions on Entitlements to Support
Complementary Measures
Concluding Remarks
Appendices
I. Statistical Tables
II. The Arithmetic of the Monetary Compensatory Amounts (MCAs)
III. The Effects of the CAP: A Survey of the Literature
IV. Economic Costs of the CAP: An Illustrative Exercise for the Federal Republic of Germany
References
TABLES
Section
I.
1. Agricultural Producer Support for Selected Countries and Major Commodities, 1982–84
II.
2. EC: Self-Sufficiency in the Community of Six Before the CAP
3. The Main Instruments Used for the Implementation of the CAP—Selected Products
Appendix
I.
4. Monetary Gaps
5. EC: Coefficients of Nominal Protection for Selected Agricultural Products
6. OECD: Producer Subsidy Equivalents (PSEs) by Commodity and Country
7. EC: Development of Agricultural Producer Prices (in real terms)
8. EC: Ratio of Producer Prices to Input Prices
9. EC: Self-Sufficiency in Cereal Production
10. EC: Self-Sufficiency in White Sugar Production
11. EC: Self-Sufficiency in Butter Production
12. EC: Self-Sufficiency in Wine Production
13. EC: Self-Sufficiency in Vegetables and Fruit Production
14. EC: Self-Sufficiency in Meat Production
15. EC: Self-Sufficiency in Pork Production
16. EC: Self-Sufficiency in Wheat Production
17. EC: Self-Sufficiency in Beef Production
18. EC: Self-Sufficiency in Egg Production
19. World Production and the EC’s Share in Trade of Selected Agricultural Products (1983–85)
20. OECD: Share of Each Country in OECD Agricultural Exports
21. OECD: Share of Each Country in OECD Agricultural Imports
22. OECD: Share of Agricultural Imports in Total Imports
23. OECD: Share of Agricultural Exports in Total Exports
24. EC: Ratio of Stocks to Production for Selected Commodities and Countries
25. OECD: Share of Agricultural Value Added in GDP
26. OECD: Growth of Agricultural Employment
27. OECD: Share of Agriculture in Civilian Employment
28. EC-10: Holdings—Number and Area Covered by Agriculture
29. EC-10: Average Size of Agricultural Holding per Member State
30. EC: Distribution of Farm Sizes in 1985 by Country
31. OECD: Relative Labor Productivity in Agriculture
32. EC-10: Revenue of the Agricultural Sector
33. Expenditure by the European Agricultural Guidance and Guarantee Fund, by Country
34. Expenditure by the European Agricultural Guidance and Guarantee Fund, by Product
35. EC-9: Agricultural Expenditure by the Member States in 1975 and 1980
36. EC-9: Agricultural Expenditure by the Member States and the EAGGF in 1975 and 1980
37. Welfare Effects of the CAP on EC Members
38. Welfare Effects of the CAP by Country in 1980
39. Trading Position of the EC
40. EC: Export Share in World Agricultural Exports
41. EC: Exports of Agricultural Products to Various Groups of Countries
42. EC: Imports of Agricultural Products from Various Groups of Countries
43. Effects of the CAP on International Prices
44. Effects of the Abolition of the CAP on World Trade
45. Effects of a Complete Liberalization of the CAP on the Welfare of Non-EC Countries
46. Effects of the CAP on International Price Stability
47. EC-10: Agricultural Support Prices and Inflation, 1981/82–1988/89
II.
48. The Computation of Monetary Compensatory Amounts—Illustrative Examples for the French Franc
IV.
49. Input-Output Structure for the Base Year
50. Federal Republic of Germany: Key Parameter Settings
51. Federal Republic of Germany: Changes Elicited by the Abolition of Agricultural Protection Through the CAP
52. Federal Republic of Germany: Notation of Variables
CHARTS
Section
II.
1. Basic Mechanism of CAP Price Support
Appendix
III.
2. The Economics of Price Support: The Single-Country Case
The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1984–85 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1985/86) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
Prefatory Note
This paper had two purposes: first, to trace the evolution and major developments of the Common Agricultural Policy (CAP) of the European Community and, second, to assess its effects on the economies of the EC member countries and on the rest of the world. From an economic point of view, the conclusions of the study are unambiguous: the CAP has been less than fully effective at attaining its goals and its instruments have entailed very costly inefficiencies. But it would be unfair to judge the performance of the CAP only against the norms of free trade—free trade in agriculture proved an elusive objective with considerable intervention by most governments.
The authors are indebted to numerous colleagues and to staff members of the EC Commission for helpful comments on an earlier draft of this paper. The views expressed should not be attributed, however, to anyone other than the authors and should not be construed as those of the Fund. The authors are also grateful to Behrouz Guerami and Ted Saxerud for research assistance, Valerie Pabst for secretarial assistance, and Juanita Roushdy and Elin Knotter of the External Relations Department for editing. A word on the ordering of the names of the authors may be useful: Messrs. Rosenblatt and Mayer coordinated the work; the names of the other authors are in alphabetical order.