1957 created the European Economic Community (EEC), the forerunner of today’s EU. That Treaty already foresaw CAP as a means to provide affordable food for EU citizens and a fair standard of living for farmers. A less charitable interpretation of the origins of CAP are that, in the negotiations to create the EEC, a system of agricultural subsidies as its price for agreement on the free movement of industrial goods throughout the EEC.
Either way, the essence of the early policy was price support which was successful in increasing the availability of affordable food but eventually led to significant oversupply in the 1970s and 80s.
As a policy response, the EU introduced product quotas to try to align production to market demand and then, in the 1990s, reduced price support and increased direct payments to farmers. The direct payments were still made in connection with the production of certain products (so-called ‘coupled support’) but, in return for the subsidy, farmers had to meet food quality and sustainability requirements.
In 2000, the idea of Rural Development Support (RDS) was introduced – policies and related payments to support the more general economic, social and cultural development of rural Europe. This was the first modern-era CAP, each of which runs for a number of years (the current CAP covers the period 2014 to 2020) and all of which are based on these two pillars:
Pillar 1 – direct payments from the EU budget to farmers to subsidise food production and encourage good agricultural practices.
Pillar 2 – Rural Development Support where each Member State implements a rural development strategy where further subsidies are available to farmers who implement the programme.
The modern CAP reduces income volatility by guaranteeing minimum income for farmers and rural communities. What it does not do particularly well is protect against market failure or against price volatility, except for a few emergency measures.