Towards a more development friendly Common Agricultural Policy (CAP).
Date: 2008-11-19
Institutions: Directorate-General for Agriculture and Rural Development
Subjects: common agricultural policy, developing countries, development aid, development policy, food aid, trade relations

Towards a more 
development 
friendly Common 
Agricultural 
Policy (CAP)

European Commission
European Commission
Agriculture and Rural Development
Agriculture and Rural Development

FOREWORD

Mariann Fischer Boel 
Commissioner for Agriculture and Rural Development

The European Union's Common Agricultural Policy (CAP) has been propelled 
into the headlines in recent months by the European Commission's proposal 
for a Food Facility to help developing countries deal with high food prices. 
This proposal, currently being discussed in the European Parliament and 
the Council, seeks to help the most vulnerable developing countries most 
seriously aff ected by high food prices to boost their agricultural production. 
Unfortunately, investment in agriculture has been neglected in many 
developing countries. This needs to be reversed to improve food security. 
While food prices were stabilising at the time of writing in the latter part of 2008, they are expected to 
remain at high levels compared to recent years.

The 1992 and 1999 reforms of the CAP had already brought a signifi cant shift in policy: a reduction 
in price support and the introduction of direct income support payments to farmers. A major step 
was achieved with the 2003 reform and the move towards so-called 'decoupled' income support. By 
the time the latest reforms are fully implemented, almost 90% of direct payments will be decoupled 
from production. This means that the link between the aid farmers receive and what they produce is 
essentially broken, which frees them to produce what the market wants. And of course, production which 
responds well to the global market's shifting needs is not production which weighs on that market. 
Furthermore, the percentage of decoupling should increase further if the Council of Ministers accepts 
our related proposals in the ongoing 'Health Check' of the CAP. Other developed countries are going 
in the opposite direction by injecting more and more money into the most trade-distorting forms of 
agricultural support. Not only is the EU moving away from trade-distorting farm support, but it is also 
the biggest importer of agricultural products from developing countries. Furthermore, the EU typically 
imports close to 60 billion dollars' worth of agricultural products from developing countries – more than 
the other fi ve major importers taken together (the US, Japan, Canada, Australia and New Zealand).

The EU had already committed itself to phase out export subsidies in the framework of the World Trade 
Organisation's Doha Development Agenda - subject to parallel commitments for other types of export 
subsidies from other developed countries. Regrettably, the WTO Ministerial meeting failed at the end of 
July 2008. The failure to reach agreement is a huge wasted opportunity to cut barriers to trade, to open 
up markets and to give a much-needed boost to the global economy. This was also a lost opportunity 
for developing countries, which had so much to gain from a successful outcome. The EU will continue 
striving towards a development-friendly DDA outcome.

As bilateral trade agreements across the globe multiply, we should not forget that, in 2001, the EU granted 
duty-free and quota-free access to all exports from Least Developed Countries except armaments, and 
the same approach is being extended to African, Caribbean and Pacifi c countries in the context of the 
Economic Partnership Agreements (EPAs). The EPAs will stimulate trade and growth – including in the 
food and agricultural sector     – which will also contribute to food security in developing countries.

All in all, the EU is taking clear and bold steps to help developing countries meet their food security 
objectives. The proposedFood Facility, the ongoing CAP reform process and EPAs are among these 
steps. Food insecurity is a serious concern in many parts of the world. The EU has already shown that 
it is not turning a deaf ear to such concerns.

THE CAP AND 
FOOD SECURITY

The Millennium Development Goals (MDGs) have been once again high on the political agenda since 
the Accra meeting in early September 2008 and in view of the Doha Financing for Development 
Conference in November 2008. When reviewing progress in achieving the MDGs halfway towards 
the target date of 2015, it becomes clear that a lot still needs to be done. Signifi cant work and eff orts 
are, for example, still required on MDG 1 (eradicating extreme poverty) and MDG 7 (environmental 
sustainability). These topics are currently being discussed within the context of the United Nations 
Commission on Sustainable Development (UN-CSD).

The MDG report1 released by the UN in September 2008 highlights that agricultural policy has an 
impact on developing countries' food security objectives. For example, the report cites that within 
the Doha Development Agenda (DDA), one objective is the phasing out of export subsidies. As 
is clear from Graph 1 below, the EU has reduced signifi cantly its export refunds and in 2008 it is 
estimated that these constitute less than 2% of the CAP budget. This illustrates the direction that 

Graphic 1

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Export subsidies

Direct aids

Market support

Decoupled payments

Rural development

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1 Delivering on the Global Partnership for Achieving the Millennium Development Goals, MDG Gap Task Force 2008. 

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the CAP has been following for more than a decade. Payments decoupled from production have 
been introduced and their share has been increasing while traditional market support, which is 
trade distortive, is in constant decline. In addition to this, the funds allocated to rural development 
measures, which aim at boosting farm competitiveness, environment and quality of life in rural 
areas, are on the increase (see Graph 1). 

The multifunctional role of agriculture, already a central feature of the CAP, is being reinforced 
by the CAP Health Check launched in 2007 with the objective of removing remaining restrictions 
on farmers in order to help them respond to growing demand for food. The Health Check will 
further break the link between direct payments and thus allow farmers to follow market signals 
to the greatest possible extent.

FOOD AID
The issue of international food aid has been raised in the context of the WTO Doha Development 
Agenda negotiations. Food Aid is an indispensible instrument of emergency relief. However, food 
aid policies and disciplines have to be properly implemented in order to ensure that the delivery 
of food aid in emergency situations does not reduce local or regional market opportunities and 
incentives for (enhanced) agricultural production. The EU provides cash and direct funding that 
benefi ts the recipients and not the donors.

The 1999 Food Aid Convention (FAC) is an international agreement2, which reaffi  rms donors’ food 
aid commitments. The FAC aims to contribute to world food security and improve the ability 
of the international community to respond eff ectively and effi  ciently on a predictable basis to 
emergency food situations and other food needs of developing countries. Current FAC Members 
are, in addition to the European Community and its Member States (European Commission and 
EU27), Argentina, Australia, Canada, Japan, Norway, Switzerland and the USA.

The EC attaches great importance to ensuring that the Food Aid Convention (FAC) continues to 
play an important role as an expression of solidarity to people in need. FAC provisions will be 

2 The Food Aid Convention of 1999 (FAC) was concluded by the Community by Council Decision 2000/421/EC.

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discussed amongst FAC members within the forthcoming renegotiations. A renewed FAC will 
have to take into account today's realities and in particular the issues of predictability, fl exibility 
and amount of food aid. Food aid should be provided on the basis of appropriate and credible 
needs assessments. The objective is to use food aid only as a short term instrument in emergency 
situations, whilst ensuring coherence with other food security interventions. In addition, the 
FAC should endorse the outcome of the negotiations of the WTO Doha Development Agenda in 
particular as they concern rules and disciplines applicable to all international food aid. 

THE EU'S RESPONSE TO HIGH FOOD PRICES
These past months have been dominated by discussions on the implications of high food prices 
for food security. Analyses by the OECD, the World Bank and the FAO project that over the next 
few years food prices will decrease, although not to the levels seen in the past. High food prices 
have a negative impact on net food buyers but this situation could result in a positive response 
to net sellers. Rising food prices, for example, will off er new income generating opportunities to 
farmers and should enhance the contribution of agriculture to economic growth. It is evident that 
the right framework conditions need to be put in place to provide the necessary market signals 
for higher investment in agriculture, in particular in Sub-Saharan Africa. The G8 conclusions in 
July 2008 recalled the need to reverse the overall decline of aid and investment in agriculture in 
support of the Comprehensive Africa Agricultural Development Programme (CAADP). As stated 
in the Communication from the European Commission “One Year after Lisbon: The Africa EU 
Partnership at Work”, released in early October 2008, one of the targets for future activities with 
the African Union is joint work and activities to reinforce the link between the EC Food Security 
Thematic Programme, the Food Facility (see below) and the African Framework for Food Security 
outlined in Pillar 3 of CAADP, in particular to support local demand and stimulate production 
by smallholder farmers (besides support to food security information systems and support to 
regional and continental farmers' organisations), and agricultural research, technology and 
dissemination. 

6

3 COM (2008)321

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On 20 May 2008 the European Commission adopted the Communication “Tackling the challenge 
of rising food prices-Directions for EU action”3. The three-pronged policy response proposed by 
the Commission includes the following measures:
1)  Short-term: the Health Check of the Common Agricultural Policy and monitoring of 
the retail sector under the Single Market Review in line with competition and internal 
market principles. 

2)  Initiatives to enhance agricultural supply and ensure food security including the promotion 
of sustainability criteria for biofuels, the development of future generations of biofuels 
in Europe and at the international level, and strengthening agricultural research and 
knowledge dissemination especially in developing countries.

3)  Initiatives to contribute to the global eff  ort to tackle the eff  ects of price rises on poor 
populations including: a more coordinated international response to the food crisis, in 
particular in the UN and G8 contexts; continued open trade policy off  ering preferential 
access to the EU market to the world's poorest countries; swift response to immediate 
short-term humanitarian needs; and targeting development aid at longer-term projects 
to revitalise developing countries' agriculture.

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More specifi cally, the proposals of the CAP Health Check will serve as part of the solution to ease 
the global pressure on food prices. These include:

  Phasing out milk quotas: milk quotas will be phased out by April 2015. Currently many farmers 
are looking at their quota levels as production targets irrespective of the market. It is expected 
that relaxing milk quotas will have a positive impact on regional and global markets.
  Abolition of set-aside4 is also seen as having an impact on food security as it will free up more 
land for food production. 
  To scrap the current energy crop subsidy of €45 per hectare which will increase the market-
orientation of agricultural production and remove the distortion between food, feed and 
energy uses.

Through the CAP Health Check the EU will achieve greater market-responsiveness and accuracy 
to demand, which are key in order to moderate rising commodity price rises. 

8

4  Land set-aside refers to the removal of land from production, usually for supply control, regional development or environmental purposes. 
Set-aside is sometimes required as a condition for farmers to receive support payments.

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THE 1 BILLION EURO FOOD FACILITY
Several international organisations have emphasised how the current food crisis will push more 
people into poverty and hunger. The proposed 1 billion euro Food Facility launched by the 
European Commission earlier this year and which is currently being discussed in the Council and 
the European Parliament, is part of the response to address the crisis. It seeks to provide a rapid 
response which could already give the fi rst results in the next planting seasons. Nevertheless, 
a precondition for success is the need to have a coordinated action at the global, regional and 
local levels. Talks have been taking place with the UN's High Level Task Force on the Global Food 
Security Crisis and various international and regional organisations in recent months to earmark 
these funds to the most vulnerable countries aff ected by high food prices. 

The aim is to target the proposed Facility so that the necessary production responses start having 
a positive impact to reduce poverty and hunger in the shortest possible timeframes. Discussions 
on a coordinated eff ort also took place at the United Nations on 25 September 2008 during the 
High-Level Food and Climate Change Event.

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AGRICULTURE AND PREFERENTIAL 
TRADE RELATIONS WITH 
DEVELOPING COUNTRIES 
 THE CASE OF ACP COUNTRIES

The EU grants trade preferences to developing countries under diff erent schemes. The EU's non-
reciprocal preferential arrangement is the Generalised System of Preferences (GSP) available to all 
developing countries, combined with its Everything But Arms (EBA) initiative for Least Developed 
Countries (LDCs). In addition, a special preferential scheme was available for the group of ACP 
countries under the Lomé Conventions and the subsequent Cotonou Agreement. These special 
preferences were allowed under an exception from WTO rules, the so called WTO waiver, and 
limited in time until 31 December 2007. 

ECONOMIC PARTNERSHIP AGREEMENTS  NEW DRIVERS OF 
DEVELOPMENT
The trade preferences of the Cotonou Agreement, while well intentioned, have not succeeded in 
their objective of helping to integrate the ACP countries into the world economy, nor protected the 
EU's trade relationship with ACP from legal challenge by other WTO Members. This is why the ACP 
States and the Community decided, in the Cotonou Convention, to overhaul their previous trade 
relations. They agreed to replace the Cotonou trade preferences by new WTO compatible trading 
arrangements called Economic Partnership Agreements (EPAs), progressively removing barriers to 
trade and enhancing cooperation in all areas related to trade. In 2007, the EU adopted an Aid for 
Trade Strategy. One aim of this policy initiative is to build upon, foster and support ACP regional 
integration processes. Building on existing strengths of the EU in the area of Aid for Trade, the EU 
will support ACP regions and countries to take full advantage of increased trading opportunities 
and maximise the benefi ts of trade reforms, including those of the EPAs. The strategy commits 
the EU to increase resources available for Aid for Trade, and to work with partners to ensure that 
these are channelled in an eff ective and comprehensive manner.

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AGRICULTURE AND PREFERENTIAL 

TRADE RELATIONS WITH 

DEVELOPING COUNTRIES 

 THE CASE OF ACP COUNTRIES

EPA negotiations have been conducted with six regional confi gurations 
covering all ACP countries (West Africa, Central Africa, Eastern and Southern 
Africa, the Southern African Development Community, Caribbean and 
Pacifi c). At the end of 2007, negotiations on a fi rst full regional EPA with the 
Caribbean region and a number of interim agreements were concluded 
with certain countries or regions in Africa and the Pacifi c. These interim 
agreements serve as stepping stones towards full regional EPAs currently 
under negotiation. The aim of these agreements is to help ACP countries 
to build larger markets, foster trade in goods and stimulate investment. 
The full EPA with Cariforum was signed on 15 October 2008.

Given the importance of agriculture for ACP countries, agriculture plays an 
important role in EPAs. The EPA with the Caribbean region (CARIFORUM), 
for example, contains a chapter on agriculture and fi sheries, which, among 
others, covers provisions on cooperation and assistance to the agri-food 
sectors of the region and addresses the issue of food security.

Graphic 2 :  Exports of agricultural products 
from ACP countries

Others 17%

Canada 2%

Russia 2%
India 3%

Japan 3%

China 5%

USA 11%

EUR 25 
57%

Source: COMTRADE
Average 2004-2008

The new agreements will slowly and progressively open up EU-ACP trade 
in goods: immediately for ACP goods exported to the EU and gradually for EU goods exported 
to ACP countries. The EC has opened its market to duty-free and quota-free exports from the 
ACP under EPAs, including all agricultural products with transitional provisions only for sugar (till 
2015) and rice (till 2010). Graph 2 below shows the importance of the EU as a destination for ACP 
agricultural exports. 

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The extensive opening up of the EU market has the added advantage of giving ACP countries 
maximum fl exibility without breaching WTO rules. Opening up of the ACP markets will aff ord 
enough fl exibility to protect sensitive sectors and off er safeguard mechanisms to cope with 
unforeseen problems. In fact, most of the ACP's sensitive products are in the agricultural sector, 
for example Ghana's chicken products – the EC and Ghana agreed that under an EPA there will 
be no change at all in the tariff s Ghana uses to protect its poultry sector. 

Rules of Origin (RoO) express the local processing requirements for a good to be considered as 
being of local origin and hence qualify for preferential market access. The RoOs of EPAs improve the 
RoO of the expired Cotonou regime. They provide among others some relaxation and simplifi cation 
for agricultural and processed agricultural products which will enable ACP farmers and producers 
to access EU market more easily. 

For developing countries that are important producers of agricultural goods, Geographical 
Indications (GIs) will provide a useful tool to increase trade and promote development. The 
EC-CARIFORUM EPA includes a chapter on GI protection that establishes mutual recognition of 
national systems of GI-protection assures coexistence of GIs and trademarks – where appropriate 
– and foresees starting negotiations on a future agreement on the protection of geographical 
indications. 

KEY COMMODITIES
Sugar
Sugar is a key example of the EU's preferential trade relations with developing countries. For 
many years the EU has provided preferential access to its market for sugar imported from ACP 
countries and India. Specifi c trade regimes have been applied, in particular the "Sugar Protocol" 
and the EBA.

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The Sugar Protocol is a bilateral agreement between 20 ACP countries and the EU, initiated in 
1975. The EU undertakes to import a fi xed quantity of sugar (1.3 million tonnes in total per year) 
duty free, at a guaranteed price linked to the EC institutional price. There is a similar agreement 
with India to import 10 000 tonnes. 

The opening up of the vast and profi table EU market has led the Community to terminate the 
Sugar Protocol under the procedure laid down in Article 10 thereof. To help ACP countries adapt 
to lower European prices, the Sugar Protocol countries will benefi t from EUR 1.24 billion in 
accompanying measures over the period 2007-2013. The market will be opened up to the ACP 
countries in stages:

  until 30 September 2009: the terms off ered by the Sugar Protocol will be maintained and market 
access under EPA will be improved by increasing the tariff  quotas;
  from 1 October 2009 to 30 September 2015: LDCs will have free access to the market (on the 
terms laid down in the "Everything But Arms" initiative), the only restriction being an automatic 
safeguard clause for non-LDC ACPs under EPAs;
  from 1 October 2015: there will be free access to the market for all ACP countries under EPAs, 
with the general safeguard clause remaining applicable should imports from ACP countries 
violently destabilise the EU market.

Bananas
The EU is the largest consumer and importer of bananas in the world. About 80% of EU imports 
come from Latin America and 20% from ACP countries. The EU is the destination for practically 
all ACP banana exports.

Since 1 January 2006, the "Everything But Arms" initiative grants duty-free quota-free access for 
bananas from Least Developed Countries (LDCs) to the EU market. Non-LDC ACP countries benefi t 
from duty-free and quota-free access under the EPA trade regime since 1 January 2008. All ACP 
banana exporters concluded negotiations on a full or interim EPA at the end of 2007.  

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POLICY COHERENCE FOR 
DEVELOPMENT PCD AND THE CAP

Policy Coherence for Development (PCD) is a dimension of EU development policy that aims to 
ensure that Community policies across a range of issues support, or at least do not undermine, 
the attainment of development objectives. In conformity with Article 178 of the EC Treaty, the 
Commission, the European Parliament and the EU Council, set out on 20 December 2005 a common 
EU vision of development policy in the framework of the European Consensus on Development. 
The EU agreed to PCD commitments in twelve policy areas: trade, environment, climate change, 
security, agriculture, fi sheries, social dimension of globalisation, employment and decent work, 
migration, research and innovation, information society, and transport and energy.

In September 2007, the European Commission adopted the European Union's fi rst Report on 
Policy Coherence for Development, which highlighted the interactions and complementarities 
between development policy and the twelve other internal and external EU policies that have 
an impact on developing countries. Discussions on the 2009 PCD Report have just started within 
the European Commission.

The EU takes into consideration the objectives of development cooperation when implementing 
the Common Agricultural Policy. The CAP reform has looked into development aspects even 
before the implementation of PCD. Hence, the major reforms of 2003 and 2004 signifi ed a strong 
contribution to reducing trade-distorting eff ects of EU support to agriculture and enhancing 
positive social and environmental eff ects. A concrete example is the fruit and vegetables reform 
with the elimination of the distorting impacts of processing aid and export refunds.

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CONCLUSION

With higher food prices and input costs, Europe's farmers still need to meet the challenge of 
producing quality and safe food at aff ordable prices. The CAP has achieved a great deal in the 
past decades; it has evolved and reformed itself to refl ect new realities, a process which is at this 
moment being re-discussed within the context of the CAP Health Check.

At an EU level, the CAP will aim to continue providing European farmers with the right market 
signals to produce using sustainable production practices whilst responding to the new challenges 
presented by climate change and water scarcity that rural areas are already confronting. In 
developing countries the issue of climate change is also impacting heavily on the productive 
capacity of farming communities.

There is a clear understanding that food and agriculture should be placed higher on the international 
political agenda. The year 2008 has been a turnaround point and the international community, 
under the aegis of the UN, has also started responding in a coordinated manner to help resolve 
the food security crisis. At the UN General Assembly in September 2008, measures to resolve 
the food crisis, addressing global warming and how to help the African continent in particular 
to make headway in halving poverty, illiteracy and other socio-economic ills by 2015 were high 
on the agenda.

The European Union is a key actor in actively contributing to concerted eff orts so that the African 
continent in particular can strive towards meeting its MDG targets by 2015, notably MDG1. The 
EU will continue to adjust the CAP, wherever necessary, to tomorrow's realities, including those 
refl ecting the food security concerns of the developing countries.

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European Commission
Directorate-General for Agriculture 
and Rural Development

http://ec.europa.eu/agriculture/

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DOI: 10.2762/90732