COMVIISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 100 final 
Brussels, 1 February 1991 
COMMUNICATION OF THE COMMISSION TO THE COUNCIL 
THE DEVELOPMENT AND FUTURE OF THE CAP 
Reflections Paper of the Commission 

Subject: The Development and Future of the CAP - Reflections 
Paper of ^e Commission, 
I. Background 
1. The Common Agricultural Policy was created at a time 
when Europe was in deficit for most food products. Its 
mechanisms were devised to meet this situation. In 
essence, they support internal prices and incomes, 
either through intervention or border protection or, 
where no frontier protection exists, by variable aids 
(deficiency payments) to processors using agricultural 
products from the Community which have to be paid for at 
more than the world price. 
The Policy has made an important contribution to 
economic growth and has been successful in providing 
European consumers with a wide range of quality food 
products at reasonable prices. Nevertheless the 
system, which corresponded well to a deficit situation, 
has revealed a number of deficiencies as the Community 
has moved into surplus for most of its agricultural 
products. These deficiencies can be analysed briefly as 
fo11ows: 
the price* end guarantees provided through intervention 
and production aide etfnulate output at a rate 
increasingly beyond the Market's absorption capacity; 
between 1§73 end IMS the volume of agricultural 
production in the EfC increased by 2% per annum whereas 
internal coneuMption grew by 0.5% only per annum. 
- 2 
This development has led to a costly buifd up of stoclcs 
(valued at 3.7 billion ECU in the 1991 budget), it has 
led also to the Community having to export more and more 
on to a stagnant world market. This goes some way 
towards explaining the tension between the Community and 
its trading partners. 
a system which links support to agriculture to amounts 
produced stimulates production growth and thus 
encourages intensification of production techniques. 
This development, if unchecked, leads to negative 
results. Where intensive production takes place nature 
is abused, water is polluted and the land empoverished. 
Where land is no longer cultivated because production is 
less dependent on surface area, abandonment and 
wiIderness occur. 
Income support, which depends almost exclusively on 
price guarantees, is largely proportionate to the volume 
of production and therefore concentrates the greater 
part of support on the largest and the most intensive 
farms. So, for example, 6% of cereals farms account for 
50% of surface area in cereals and for 60% of 
production; 15% of dairy farms produce 50% of milk in 
the Community; 10% of beef farms have 50% of beef 
cattle. The effect of this is that 80% of the support 
provided by FEOGA is devoted to 20% of farms which 
account also for the greater part of the land used in 
agriculture. The existing system does not take 
adequate account of the incomes of the vast majority of 
small and medium size family farms. 
The per capita purchasing power of those engaged in 
agriculture has improved very little over the period 
1975-89. This development is all the more worrying in 
that over the same period the Community's active 
agricultural population has fallen by 35%. 
- 3 
This situation is particularly difficult to accept in 
the context of ever increasing expenditure. In 1975 the 
EAGGF (Guarantee) budget was 4.5 billion ECU; this had 
risen to 11.3 billion ECU in 1980 and to 31.5 billion 
ECU in 1991 (ie 11.5 billion ECU at constant 1975 
prices). 
The contrast between on the one hand such a rapidly 
growing budget and on the other agricultural income 
growing very slowly, as well as an agricultural 
population in decline, shows clearly that the 
mechanisms of the CAP as currently applied are no 
longer in a position to attain certain objectives 
prescribed for the agricultural policy under Article 39 
of the Treaty of Rome, namely to ensure a fair 
standard of living for the agricultural Community, 
stabilise markets, ensure reasonable prices to 
consumers, take account of the social structure of 
agriculture and of the structural and natural 
disparities between the various agricultural regions. 
Notable socio/economic features are 
- over half the Community's farmers over 55 years of age 
- large contrasts in income levels between Member 
States; the best placed having three times the per 
capita income of the least favoured 
- one in three farmers working part-time 
- significant differences (ranging from 4 to 65 hect) in 
size of holding per Member State 
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I I The reforms undertaken 
1. The above analysis is not new. It has already been 
made on several occasions, notably in 1985 when, on the 
basis of its "Green Paper", the Commission launched a 
wide debate on the future of agriculture in Europe. At 
the end of this debate the Commission adopted a number 
of guidelines (memorandum of 18 December 1985) which can 
be summed up as follows: 
progressive reduction of production in surplus sectors, 
by means of a price policy reflecting market demand 
taking into account the income problems of small family 
farms in a more effective and systematic manner 
supporting agriculture in areas where it is 
indispensable from the point of view of regional 
development, maintaining social balance and protecting 
the environment. 
promoting an increased awareness among farmers of 
environmental problems. 
2. Based on these guidelines, the market organisations were 
reformed. The essential elements (the stabilisers) were 
an important part of the conclusions of the European 
Council of February 1988. While using different 
techniques adapted to the characteristics of each 
market organisation, these reforms had the common aims 
of lowering of price when the quantity produced 
exceeds a given threshold, increased participation of 
producers in financing expenditure (eg cereals) and 
reducing the guarantees provided by intervention. A 
ceiling was placed on agricultural expenditure, so as to 
link it to trends in the Community's GDP. 
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3. This market policy, based essentially on price policy, 
was to be accompanied, according to the conclusions of 
the European Council, by measures having a double 
object ive. 
to reduce the volume of production through set-aside, 
extensification, conversion of production and pro-
pension aids linked to non-utilisation of land freed on 
ret irement. 
to cushion the effects on the incomes of the most 
vulnerable farmers, of falls in price and increased 
coresponsibiIity. Aid schemes for small producers and 
the reduction of coresponsibiIity in certain market 
organisations (milk, cereals) were intended to meet this 
concern. 
I I I OveralI evaluation 
1. The market measures taken have had some impact in so far 
as the rapid expansion in production has been halted. 
The most notable example has been in the oilseeds sector 
where production seems to have stabilised around 11/12 
mi I I ion tonnes. 
This trend, accompanied by a relatively favourable world 
market situation in 1988 and 1989, allowed the 
Community to go through two marketing years without any 
great problem, while reducing stocks and budgetary 
costs. But this should not give rise to any 
illusions. Some markets are already well out of balance 
or threaten to become so rapidly:-
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production of beef is increasing and stocks in this 
sector are some 700.000 tonnes, ie approaching the 
record level of end-1987. 
stocks of butter and of skimmed milk powder are 
increasing and have attained a level of 278.000 tonnes 
and 335.000 tonnes respectively 
production of sheepmeat is increasing constantly and 
budgetary requirements have doubled over a four year 
per iod. 
production of tobacco is now some 30.000 tonnes in 
excess of the maximum guaranteed quantity and the cost 
of the regime has risen by over one-third in recent 
years. 
as regards wine the underlying production potential 
coupled with the continuing decline in consumption of 
table wine, risks adding further to the public stocks 
(8 million hectolitres at present) of alcohol. 
the need to maintain the competitive position of sugar 
and coherence with other regimes requires that the 
present arrangements be reviewed. 
the trend on the cereals market is especially worrying. 
While total production has remained at around 160 
million tonnes two major problems remain. Because of 
competition from substitutes, consumption of cereals in 
animal feed is declining constantly by between 1.5 and 
2m tonnes annually. In addition, over the last 3 
years, wheat production has increased by 10 million 
tonnes while the world market has been largely stagnant 
over the last 10 years. Intervention stocks of cereals 
are rising sharply (now 18 million tonnes compared to 
11.5m tonnes at the beginning of the marketing year). 
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Early indications are that stocks could increase by 10 
million tonnes by the end of the next marketing year 
(1991/92). 
These developments are reflected in budgetary costs. 
Initial work on the 1992 budget shows that FEOGA 
spending could increase by 4 billion ECUs or 12.5% 
compared to the budget of 1991, itself an increase of 
20% compared to spending in 1990. 
Without doubt a significant part of this increase in 
agricultural expenditure is due to external factors 
(fall of dollar and of world market prices) but the 
fundamental problem - internal to the Community -
arises from the growth of surpluses which, as the 
figures show, has not been resolved. 
The accompanying measures envisaged by the European 
Council of February 1988 have been applied to a limited 
extent only, as the following figures illustrate:-
Only 800.000 hectares, or 2% of the cereals area, have 
been set-aside; most often it is the land with low 
yields that has been withdrawn. 
the extensification scheme has now begun to be applied 
but, apart from one Member State, it operates 
essentially on an experimental basis; no payment was 
made by FEOGA in 1990 which shows that up to the end of 
1989 at least, the scheme did not operate. 
the income aid arrangements are beginning to be applied 
in three Member States (3.000 beneficiaries in the 
Netherlands, 55.000 in France and 80.000 in Italy). No 
payments have been made by FEOGA in 1939 and 1930. 
the p fa-pans ion scheme applies in ona Camber Stats or.Sy. 
8 -
The following factors help to explain devetopments 
relating to the markets and the accompanying measures:-
In the first place the stabilisers policy has not 
fundamental reform of the CAP. As its description 
suggests, it was a policy to stabilise production and 
spending, through a largely automatic mechanism whereby 
the price and the guarantee reduced beyond a certain 
production threshold. 
This policy did not attack the underlying problems 
already identified viz that support through the EAGGF 
remains proportionate to the quantity produced; this 
factor preserves a permanent incentive to greater 
production and further intensification. The reductions 
in prices needed to re-establish market balance cannot 
be achieved unless accompanied by significant 
compensation measures not connected with volume of 
production. 
Although the European Council had envisaged compensating 
measures, they have played only a marginal role since, 
in a sense, they have been tacked on to a system whose 
mechanisms have not changed. To be effective, measures 
covering direct aids, on the basis of area or livestock 
units and linked to temporary fallow or extensification 
requirements, should be part of the market organisations 
themselves. They should indeed constitute the substance 
of the market regimes. 
Having been applied to a limited degree only, the 
accompanying measures have not played their expected 
moderating role. This has made it more and more 
difficult to operate the market policy and have it 
accepted by producers. 
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The reforms of the years 85/88 have not been implemented 
and are themselves incomplete. It is not surprising 
that under these conditions the CAP finds itself once 
again confronted with a serious crisis. 
First of all a crisis of confidence internally. Farmers 
are confused and worried; they find that their 
situation is worsening, that the markets are again out 
of balance, that new restrictions threaten, without any 
prospects for the future, without which no economic 
activity can be continued on a lasting basis. 
There is a crisis also externally where criticisms and 
conflicts are becoming more frequent. Our trading 
partners many of which themselves heavily support their 
agriculture accept less and less a Common Agricultural 
Policy whose increasing surpluses weigh more and more 
heavily on world markets. 
It appears in these conditions that the Community's 
agricultural policy cannot avoid a succession of 
increasingly serious crises unless its mechanisms are 
fundamentally reviewed so as to adapt them to a 
situation different from that of the sixties. 
The Commission considers therefore that the time has 
come to stimulate a reflection on the objectives of the 
Community's Agricultural Policy and on the principles 
that should guide the future development of the CAP. 
The Objectives 
1. Sufficient numbers of farmers must be kept on the land. 
There is no other way to preserve the natural 
environment, traditional landscapes and a model of 
10 -
agriculture based on the family farm as favoured by the 
society generally. This requires an active rural 
development policy and this policy will not be created 
without farmers. The Commission confirms then the 
approach taken in the "Green Paper" and in the 
Communication on the Future of Rural Society. 
2. As far as agriculture is concerned this choice has 
consequences that must be evaluated and accepted. It 
implies a recognition that the farmer fulfills, or at 
least could and should fulfill, two functions viz 
firstly that of producing and secondly of protecting 
the environment in the context of rural development. 
The activity of producing has traditionally been 
focussed on production of food. While this will remain 
the primary focus of production, growing emphasis must 
be put on supplying raw materials for non-food uses. 
Concern for the environment means that we should support 
the farmer also as an environment manager through use of 
I ess-intensive techniques and the implementation of 
environment-friendly measures. 
3. Rural development is not only concerned with the 
development of the primary sector. Other forms of 
economic activity which help to maintain rural 
populations and strengthen the economy of rural areas 
will be promoted. The examination of the adequacy of 
structural fund intervention in support of rural 
development under the 1988 reform (while recognising the 
particular importance of Objectives 1, 5a and 5b) 
will be part of the overall review of structural policy 
to be carried out in 1991. In this exercise account 
will be taken of the impact in the regions of 
implementing the guidelines set out in this paper taking 
into account their dependence on agriculture and 
available economic alternatives 
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4. In order to avoid a build up of stocks and excessive 
growth in spending on agriculture, a key objective of 
the agricultural policy has to be that of controlling 
production to the degree necessary to bring the 
markets back into balance. 
5. While the traditional instruments of price policy and 
quantitative controls will continue to have a central 
role in the attainment of market balance, the market 
organisations should also encourage extensification with 
the object of 
reducing surplus production 
contributing to an environmentally sustainable 
form of agricultural production and food 
qua Iity. 
This approach would be complemented by more specific 
measures on the environment, to be tailored to the 
situation in individual Member States. 
6. The Community must recognize the existence of 
international interdependence and accept its 
responsibilities as the leading world importer and 
second leading exporter. The Community will continue to 
play an important role on the world market both as 
regards imports and exports. This requires pursuit of a 
policy objective which guarantees the competitiveness 
and efficiency of Community agriculture. Such a policy 
would encourage also growth in consumption including 
the development on a sound economic basis of 
agricultural production for non-food uses. 
7. The CAP must continue to be based on its fundamental 
principles: a single market, community preference, and 
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financial solidarity but these principles must be 
applied as originally intended. This means correcting 
the excesses which have developed over the years, in 
particular financial solidarity implies the need also 
for a better distribution of support while taking into 
account the particularly difficult situation of certain 
categories of producers and certain regions. Also, the 
support instruments used must have a more direct impact 
on the returns to producers and take account of 
environmental requirements as well as those of 
product ion. 
8. The agricultural budget should then become an instrument 
for real financial solidarity in favour of those in 
greatest need. That implies that the support provided 
by the market organisations should be redirected so as 
not to relate almost exclusively to price guarantees. 
Direct aid measures, based generally on the livestock 
numbers or area of farms and modulated in function of 
factors such as size, income, regional situation or 
other relevant factors, should be integrated into the 
market organisations so as to guarantee the producers 
i ncome. 
Existing arrangements in the livestock sector include 
already a significant degree of modulation. The 
regional aspects, especially the impact on the less 
favoured areas, should be considered in the context of 
further modulation in this sector. 
9. Where quantitative arrangements apply or may be brought 
into effect (quotas, temporary fallow etc) the resulting 
constraints should be modulated in function of the 
factors mentioned in para 8 above. 
V Guidelines for the future 
The object of this communication is not to present reform 
proposals in detail. At this stage the Commission's concern is 
to present for general reflection certain guidelines capable of 
implementing the objectives of the agricultural policy as 
indicated above. These guidelines are underpinned by the 
principles of the Common Agricultural Policy viz single market, 
Community preference and financial solidarity; they take account 
of the need for competitiveness and market balance, better 
distribution of support, recognition of the dual role of farmers 
as food producers and guardians of the countryside, and promoting 
extensification, both in the interests of market balance and of 
the environment. 
As regards the time scale for implementing these guidelines there 
are good reasons for introducing the new arrangements at the 
earliest possible opportunity. However in order to give Member 
States and producers the opportunity of adjusting to the new 
situation under conditions that will facilitate their smooth 
application throughout the Community the measures involved would 
be established as far as practicable on a progressive basis. 
Guidelines for individual sectors, subject to the factors 
ment ioned at IV.8:-
1. In the cereals sector, prices could be reduced to a 
level which would guarantee, in a more satisfactory way 
than at present, their competitiveness with substitutes. 
The resulting loss of income would be compensated on an 
equitable basis by an aid per hectare to be paid to all 
producers. Full compensation would apply up to a 
certain level of area and partial compensation 
thereafter on a degressive basis. Beyond a certain size 
the payment of the aid per hectare would be conditional 
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on the withdrawal from production of part of the area 
devoted to arable crops, as defined each year in 
function of the state of the market. The land withdrawn 
from production could be used for non-food production. 
The level of aid per hectare would vary each year in 
function of developments on the market and of 
productivity. A corresponding regime would apply to 
oilseeds and proteins so as to ensure the coherence of 
the market organisations for arable crops and 
implementation of the conclusions of the GATT "soya 
pane I". 
These new arrangements should introduce a greater degree 
of coherence between the different support arrangements 
for arable crops; they would replace the existing 
stabilisers including the coresponsibiIity levy. 
2. The reduction in cereals prices would allow an 
adjustment of prices in the livestock sector. Direct 
aid through premiums would in future have a more 
important place in the market organisations in order to 
compensate for income losses and discourage 
intensification. The premiums would be linked to 
extensification criteria, for example through 
prescribing stocking rates per hectare. 
3. Having regard to the market situation in the milk 
sector, quotas will have to be reduced; the reductions 
in quota would apply beyond a certain level, on a 
modulated basis. 
4. Other sectors, notably sugar and tobacco would be 
reformed also in the immediate future, on a comparable 
basis to ensure the coherence of the general approach. 
15 -
5. It is necessary also to enhance the role of the farmer 
in the protection of the environment and preservation of 
the countryside. Measures should be taken to encourage 
farmers in the use of methods less damaging to the 
environment and to remunerate the contribution of 
farming towards preserving the countryside and the 
fabric of rural society. These measures would in 
future be implemented through coherent multiannual 
programmes, to be negotiated between the Commission, the 
Member State and the farmers, which would aim at 
significant cuts in the use of polluting inputs and the 
promotion of the diversity and quality of the 
countryside. 
These arrangements would be complementary to the 
approach in the arable crops sector which would operate 
so as to discourage intensification. In addition, in 
cases of environmental problems directly attributable to 
intensive farming, consideration could be given to 
linking payments of direct aid to environmentally sound 
farming practices to be defined locally. 
It would be necessary also to introduce a longterm set-
aside programme aimed at promoting afforestation of 
agricultural land and the protection of the natural 
environment. 
6. Finally, the present pre-pension scheme would be 
improved by means of increased premiums, greater 
flexibility in the conditions of eligibility, especially 
as regards the freeing of land becoming available; the 
new arrangements would be implemented in the context of 
pluriannual programmes agreed with Member States. 
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The overall approach suggested may toe challenged. Two aspects 
are likely to dominate the discussion; that is why the 
Commission considers it necessary to respond to them at this 
stage. 
a) "MODULATION OF SUPPORT IN FUNCTION OF THE SIZE OF 
HOLDING WOULD BE DISCRIMINATORY AND NON-ECONOMIC 
The argument that the modulation measures are 
discriminatory Is somewhat misleading insofar as It is 
based on a rather strange concept of equality. The 
diversity of agricultural structures In the Community 
is such that farmers are not on an equal footing. In 
such conditions the logic of support through public 
funds should aim at correcting inequalities by 
supporting those who derive fewer advantages from the 
market organisations. This aim is reflected in Article 
39 of the Treaty. 
It is the market organisations as they function now that 
are discriminatory, insofar as the bigger and more 
intensive the farm the greater the support, a situation 
which should not apply were competitiveness to be the 
object. 
The argument in relation to the ant I-economic nature of 
the modulation of support measures is not valid either. 
The Commission remains committed to providing a 
framework which recognises the role of efficient farms 
especially in relation to competitiveness on world 
markets. After 30 years of the CAP, competitiveness 
can no longer be measured in function of receipts from 
FEOGA. It is precisely because the larger farms are now 
in a position to produce with reduced support that it is 
possible to envisage the development of the policy as 
suggested. This is not a question of penalising and 
- 17 -
blocking their development but of introducing a better 
balance between support from public funds and economic 
capacity. 
The object is to make farms with the necessary capacity 
even more competitive. This will be reflected in 
somewhat less support for these farms and in a new 
balance between price support and direct aid. 
b) "THE GUIDELINES OUTLINED ABOVE MAY LEAD TO HIGHER 
BUDGETARY COST INSOFAR AS PART OF THE SUPPORT NOW 
PROVIDED BY THE CONSUMER (BY VIRTUE OF HIGH PRICES) 
WOULD BE HENCEFORTH CHARGED TO THE BUDGET" 
These reforms will have budgetary consequences whose 
significance will depend on the parameters to be chosen, 
especially in connection with the terms and extent of 
compensatory aid. Developments on the markets in the 
longer term will be an important factor also. 
The following considerations are essential : 
a reform of this kind would have advantages for the 
economy, especially for consumers. This point should 
not be forgotten in the balance sheet of the entire 
operation. 
money spent would be better used having regard to what 
should be the objectives of the agricultural policy; 
viz maintaining a sufficiently large number of farmers 
with a decent Income, protecting the environment and the 
countryside, and developing quality-based production. 
- 11 
Nevertheless, the fundamental question has to be asked, 
!s the Community prepared to make a contribution In the 
budget context to resolving its agricultural probfeir--j, 
internally and externally? 
The overall economic impact of changing the system of 
support has to be an important consideration çn zfcls 
respect. 
An agricultural guideline must of course be maintained 
as an instrument for ensuring budgetary discipline. 
Consideration could be given also to combining the new 
arrangements with overall piuriannual planning of the 
CAP. This would have the advantage of allowing farmers 
to have a medium-term planning basis on which to make 
their decisions. 
The introduction of new support mechanisms, especially 
aids on a per hectare basis, may require that existing 
control and anti-fraud systems be re-organised. 
Experience outside the Community suggests that such re­
organisation can, to a degree, help to make control more 
simple and, indeed, more effective thanks to the use of 
new techniques. 
Furthermore, having regard to the requirements of 
subsidiarity the Comunity implementing rules would be 
limited to those absolutely necessary. This would ai low 
Member States the flexibility to put measures into 
effect with due regard to their individual situations 
while subject to monitoring by the Commission. 
Conclusion 
These are the elements that have shaped the Commission's analysis 
of the policy so far. The Commission hopes that a wide debate 
- 19 -
will take place within the Community on the perspectives 
outlined in this paper. If, as the Commission hopes, the Council 
considers that the approach suggested deserves to be pursued 
further, the Commission will present proposals rapidly. 
The Commission wishes to emphasise that the status quo is the one 
option that it considers not to be viable. If the present 
policy is not changed rapidly, the situation on the markets and, 
as early as the current year the budget position, will become 
untenable. 
In these circumstances the choice is between fundamental reform 
of the present mechanisms of the CAP and a new package of 
restrictive measures offering no future prospects and which would 
be unlikely to attract support from farmers; without this 
support no policy can be carried out successfully on a lasting 
basis. 
ISSN 0254.1475 
COM (91) 100 final 
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