Essays on International Economics Assignment

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2. Write a piece about the EU’s common agricultural policy (CAP). What are the main objectives of CAP? Outline its main components. Explain in detail the economics of CAP using the appropriate models. What are the effects of CAP on prices, quantities and welfare? IntroductionAgricultural policy of Europe is influenced at European Union level by the various authorities of member states and run by member states. The introduction of the Common Agricultural Policy (CAP) was meant to control, regulate and thus boost agricultural activities in the region (Financial Management in the European Union, n.d).

The Common Agricultural Policy (CAP) is a procedure of European Union agricultural programmes and subsidies. CAP puts together a direct subsidy payment for land and crops which may be farmed with price support systems, including import quotas and tariffs for selected products imported to the EU, guarantee minimum prices. The primary aim of CAP is to provide farmers with a reasonable living standard while ensuring consumers get quality food at reasonable prices as well as preserve rural culture. Functions of Agriculture in EUThe agriculture culture in Europe is expected to fulfill various functions.

These functions are the focus of the Common Agricultural Policy in the European Union (European Commission, 2009). To understand the role of CAP, there is need to focus on the key functions of agriculture in Europe. Food securityFood security is the first role of European agriculture which is to supply food. Studies have shown that, food security issue is a critical one and need to be addressed as it may be aggravated by increased water scarcity and global climate change. The prospect to deal with this issue relies upon a functioning farming industry, a maintained production capacity and a stable trade relations system (European Commission, 2009).

Farmers in Europe face the challenge of providing food in an open market when they are expected to offer competitive prices and at the same time respond to societal standards regarding high quality products, high food safety levels, animal welfare and green farming practices. Hence, the functioning of an economically sustainable agricultural sector in European Union is depends on increasing farmer’s capacity for adjusting to new markets situations and responding to new technological and economic opportunities.

Land managementAgriculture in Europe is well established in the entire region. It is the major land use and farming is the key element in shaping the visual landscapes of the rural areas. Agriculture has helped in shaping the rural landscape with woodlands, water basins thus forming stable platform for business enterprises (European Commission, 2009). Viable rural areasIn the rural areas, agriculture is the main element which influences other driving forces such as environmental, economic and social development. Varying farming practices shapes the rural image and the entire EU rural regions.

Agriculture offers employment for the rural community, income, and lead to integration of opportunities and technological development as well as environmental sustainability (European Commission, 2009). Global markets competitivenessAgricultural sector has become more market oriented and less protection through bilateral and multilateral trade liberalization which adds to the competitive pressure. Globalization and trade liberalization may be accompanied by greater market instability which brings about new challenges for farmers and the entire food sector such as the need to swiftly adapt to market signals and to manage integral risks (European Commission, 2009).

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