Farming in Scotland is shaped to a large degree by decisions taken in Europe.  Since the Common Agricultural Policy (CAP) was established in 1962, the vast majority of support for farming has come from the European Union.

In the aftermath of World War II, the goal of the CAP was to achieve food self-sufficiency and stabilise turbulent agricultural markets.  The goals of the CAP, agreed in the Treaty of Rome, were as follows:

• To increase agricultural productivity
• To ensure a fair standard of living for the agricultural community
• To secure food supply
• To stabilise markets
• To provide consumers with reliable supplies of food at reasonable prices.

The CAP budget stands at around €40 billion and the main sectors covered by support in Scotland are cereal, sheep, beef and dairy production.  In addition, the CAP funds a range of Rural Development measures that are not linked to food production.

Since its introduction, the CAP has undergone a series of reforms in an attempt to adapt to changing circumstances.  Self-suffiency for the original six EU member states was achieved in the first decade of the CAP, accompanied by low consumer prices.  Economic and technological progresses benefited agriculture and productivity increased, which further stimulated output.

The latest reform of the CAP (mid-term review) began in summer 2002, driven to a large degree by impending EU enlargement and the need to cut spending.  The main elements of the CAP Reform package were agreed by the Council of Ministers in June 2003.   This reform of the CAP has marked a radical change in agriculture support breaking the link between production and support.   The Reform presents individual farmers with the opportunity and flexibility to base management decisions on customer requirements and the inherent capability of their farms, rather than the requirements of support schemes.   The new rules in Scotland came into effect in January 2005.

Consultation is currently ongoing in the CAP Health Check which is looking at the delivery of support between now and 2013.   NFUS has broadly welcomed the Health Check proposals but discussions are ongoing for certain key issues for Scotland.

Whilst the CAP has been the main driver of EU farm policy, an increasing number of environmental and trade directives emanate from Brussels, shaping the way Scottish farmers do business.  That is why NFU Scotland has an office in Brussels.

The European Union And The World Trade Organisation Negotiations

The numbers:

• The EU has 14 million farmers. The US has 2 million farmers.
• The average EU farmer gets less than half what the average US farmer receives in support. 
• The EU has cut support prices across the board since 1992.   US support prices have been either stable or rising in the same period. For example, EU wheat support prices fell by 42 percent wheat between 1992 and 2007; US wheat support prices are up by 35 percent since 1992. 
•  The 2003/2004 Common Agricultural Policy reforms meant 90 percent of direct support is no longer linked to production – it is therefore ‘Green Box’. 
•  This continues a trend of shifting support payments from the most trade-distorting to the least or non-trade distorting support – exactly what the WTO promotes. 

Trade in agricultural products:

• EU net exports of all supported agricultural commodities have been in decline over the last 10 years. This is the result of CAP reform, and the decline in EU production and increase in EU consumption.
• The EU is the world largest importer of agricultural goods, importing EUR 61.6 billion. 
• The EU takes 85 percent of Africa’s agricultural exports and 45 percent of those from Latin America. The EU imports more agricultural products from developing countries than the U.S, Australia, Japan, Canada & New Zealand put together.
• The EU gives the 49 poorest countries (LDCs) completely duty and tariff free access for goods except arms and ammunition (under the ‘Everything But Arms’ initiative). The EU is still the largest market for LDC exports of agricultural products ($ 3.2 billion).

EU and developing countries:

• A total of 178 developing countries and territories benefit from EU preferences under the recently enhanced "General System of Preferences" (GSP).
• The EU provides more than half of the world’s total trade development assistance. Every year since 2001, the EU has given about 750 million euros in trade development assistance. 
• Overall EU development aid (from Member States and the EU budget) is increasing.

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