THE COMMON AGRICULTURAL POLICY

EXPORT SUBSIDIES

IMPACT ON INTERNATIONAL TRADE

Lower export subsidies

Higher direct payments

IMPACT ON INTERNATIONAL TRADE

EU prices closer to world prices

International agricultural trade liberalization

Fall in cereal prices by 50%

Fall in income of African countries, which were making profits on selling goods to Europe (under Lomé convention)

An increase in the export price competitiveness of basic EU food and agricultural exports for African countries

FURTHER REFORMS

The Agenda 2000

“multi-functionality” of farming activities

The reform in 2003

A reduction in direct payments for bigger farms to finance the new rural development policy

CAP “Health Check“ 2008

Increase of milk quotas, ...

„CAP VS. AFRICA“ CASE

African exporters seem to be sensitive to EU reforms

Pros and cons of CAP reforms (from African point of view)

Future prospects

PROS AND CONS

+ Large food surpluses exported

to Africa as a food aid (before Mac Sharry)

Certain African (sugar) exporters profited from Lomé convention (€500 mil. in 99/2000)

— 2001: free access to the market

granted to the least developed countries under „Everything Buts Arms“ initiative.

Problem? – sugar, rice and bananas excluded

After Mac Sharry reform, EU price reductions drove some African exporters out of the EU market

Undermining of African markets by price-competitive EU goods (wheat) – „markets of last resort“

EU policy emphasis shift – „from quantity to quality“

lower value food

hig

her v

alue

food

Ql

Qh

PPF

SITUATION WHEN AFRICA REJECTS TO

TRADE WITH EU

Africa

TRADING SITUATIONRICARDIAN MODEL

Africa has comparative advantage in producing lower value food

lower value food

hig

her v

alue

food

Africa EU

hig

her v

alue

food

lower value food

PPF

PPF

IA

IFT

TT TT

Ql

QH QH

QH

IFT

IA

PA = CA

PFT

CFT

PA = CA

PFT

CFT

FUTURE PROSPECT

African exporters:

lower value food and agricultural products distributors

European exporters:

higher value food and agricultural products

CONCLUSION

Trend in reforms of CAP – lower direct payments

Decoupling:

↑ economic prosperity

↓ negative impacts on the environment

From import levy to direct subsidies – before and after Mac Sharry reform

Africa has to trade with lower value food

Petra AndrlíkováRadovan Parrák

REFERENCES

Institure for Agriculture and Trade Policy: The Common Agricultural Policy: A Brief Introduction, Prepared for the Global Dialogue Meeting (May 14 and 15, 2007, Washington, D.C.)

European Economic Policies: Common Agricultural Policy; Laurent Weill: Université de Strasbourg, Charles University - Prague , April 2009

Policy Notes 2009/7: The Impact of Common Agricultural Policy (CAP): Reformon Africa-EU Trade in Food and Agricultural Products

http://ec.europa.eu/budget/index_en.htm