Development Consequences of CAP Reform

1
Development Consequences of CAP Reform

• Presentation Brussels
• 10th March

2
Understanding CAP Reform

• CAP reform a coherent and effective effort to
  prepare EU food and agri (FA) sector for trade
  liberalisation
• EU has a strategic vision for the FA sector,
  which nforms all aspects of agri and agri trade
  policy.
• Pursuit of Eu vision has unforeseen consequences
  for Africas FA sector

3
The Dilemma

• How do you reconcile the EU vision of a
• globally orientated, high value, competitive FA
  products industry
• With Africa aspirations to
• move up the value chain in serving national,
  regional and international markets?
• Given EU vision informs all aspects of agri trade
  policy what counter vision should Africa be
  pursuing through negotiations and aid for trade
  deployment?

4
CAP Reform and its Impact

• CAP reform long term structural adjustment
  programme for EU FA sector, design to ensure
  propserous future in era of glovbal trade
  liberalisation.
• Central policy shift from price support to
  direct aid.
• Required re-definition of EU agricultural support
  instruments and rural development policy and
  tools.

5
Implications for African Agriculture

• Reduces the Value of Preferences
• E.G. Sugar - 192 m 34 m 40 m
• Also beef, rice, fruit and veg
• Increases Costs of Market Entry
• 8 to 12 value of exports
• Enhances EU export price competitiveness
• Simple value added food products

6
Importance of Current Trends (Value) 1999-2006

• EU exports FA products ACP 38.9
• ACP exports FA products EU -1
• ACP Agricultural trade surplus with EU down 28.2
  from 5,337 million to 2,832 million

7
Evolution of EU Market

• Two distinct components to EU FA market
• Necessity purchase products stagnant demand,
  declining prices
• Luxury purchase products rising demand, rising
  prices
• Price differential NP/LP goods increasing.
• EU actively promoting transition to serve LP
  markets through CAP instruments

8
Challenges Faced

• Two pronged challenge arises
• develop competitive production for NP components
  of EU market
• make transition to serving LP components of EU
  market.
• Trends vary by sector and country (sugar in LDCs
  / vegetables in Kenya)
• Smalhholder farmers potential advantages in
  serving LP markets
• However, external support will be needed.

9
Aid for Trade Some Questions

• This throws up significant aid for trade
  challenges
• how can African efforts to make this transition
  best be supported in the context of the planned
  expansion of EU aid for trade support?
• what lessons can be learnt from the EUs own
  internal experience of agricultural
  restructuring?
• what financial instruments of support are
  required?
• what are the best modalities for the efficient
  and effective delivery of this aid for trade
  support?
• what are the organizational pre-requisites for
  effective design of targeted programmes of
  support linked to making this transition to
  serving increasingly differentiated EU markets?