CAP and Agriculture

The financial benefits of the Common Agricultural Policy (CAP), in particular, were continuously emphasised by Irish policymakers in the run-up to membership in 1973. The CAP held out the prospect of unlimited market access, leading to substantial price increases and a rise in farm incomes in Ireland. At the time of accession the agricultural sector accounted for 50 per cent of net exports and 25 per cent of all employment. Equally attractive was the prospect that Irish farmers would no longer be dependent on selling into the UK market where prices were lower than the EEC average.

Membership delivered an unprecedented and historic dividend to the Irish farmer. Although the speculative increase in agricultural land prices before and immediately after accession proved short-lived, the farming sector went on to reap the most extraordinary share of the ‘accession pie’. Massive transfers from the CAP have been garnered ever since, Alan Matthews estimated that in the period 1979-1986 net CAP receipts averaged more than 6 per cent GNP. In 2003 the EU contributed €1.9 billion to Ireland’s total public expenditure on agriculture of €2.8 billion. The net outcome of this is that Irish agriculture receipts account for about two thirds of Ireland’s net EU transfers of approximately €56 billion since 1973.

It is undoubtedly the case that CAP receipts helped set in train a  complete transformation in living standards in rural areas. But, like protection of so many economic sectors, it has not helped to protect employment. By 2013 employment in agriculture stood at only about 5 per cent of the total labour force. So why has Ireland continued to experience such a dramatic ‘flight from the land’ if spending on agriculture increased so vastly under the CAP regime?  The most telling statistic reveals that about 30 per cent of Europe’s farmers receive  about 70 per cent of CAP payments, an indication of the ways in which the CAP  helped encourage greater concentration of agricultural land in larger (more productive) units. At the other end of the scale small farmers led an increasingly precarious existence, and were increasingly forced to take work away from the farm as their annual farm income amounted to only €16,000. Thus it seems clear that in the Irish context the vast largesse of the CAP has disproportionately benefited larger, wealthier farmers who moved toward very large production units and simultaneously accelerated the flight from the land.

From the early 1990s the CAP system came under enormous pressure; both from within Europe and beyond. Germany, the largest contributor to the EU budget, became increasingly preoccupied with absorbing the old East Germany (GDR), whilst World Trade Organisation (WTO) pressures also contributed to new demands to end the protectionist elements of the CAP. The EU’s eastern enlargement in 2004-07 acted as another catalyst for significant change, with a reduction in price supports and compensation through so-called ‘direct payments’. By 2013 direct payments accounted for up to 80 per cent of farm income in Ireland. In addition to this so-called ‘decoupling’ of payment from farm production, the EU placed a growing emphasis on rural development policies and agri-environmental measures such as the Rural Environment Protection Scheme (REPS) which ensured that farmers would pay as much attention to the environment as to production goals. Irish ministers for agriculture and their officials proved very savvy negotiators in successive rounds of CAP talks and the Irish Farmers Association (IFA) developed a sophisticated lobbying structure to protect agricultural interests. The Irish agri-food industry developed over time into a genuinely world-class sector as more and more producers ‘went global’.