Research and Discussion Papers

The Trade Policy Research Centre is concerned with realistic solutions to the UK's trading relationships with other entities, especially the European Union.

EU Agricultural Protection: Tariffs and the CAP

Please click here to download our paper 'EU Agricultural Protection: Tariffs and the CAP' as a PDF document

Executive Summary:

 • The CAP now makes up roughly 40% of the EU budget, down from 60% in the 1990s and costs about €55 billion every year.

• The EU has moved the CAP away from subsidies linked to production, instead linking subsidies to farm land.

• The UK receives roughly €4 billion in direct support payments every year.

• The EU has been much more successful in its agricultural reforms than it is generally given credit for in the UK:

o The CAP is significantly less trade distorting than it was. The proportion of EU agricultural subsidies which fall into the WTO green box measurement (non-trade distorting) has dramatically risen. Overall Trade Distorting Subsidies (OTDS) have fallen by two thirds, from roughly €60 billion in 2004 to roughly €20 billion in 2007.

o The CAP is due to be reformed again in 2013, although there is significant disagreement between the UK and other member states as to the nature of these reforms.

o EU agricultural tariffs have fallen from a bound trade weighted average rate (in Ad Valorem Equivalents) of 22.9% in 2004 compared to the applied trade weighted average figure of 11% now, according to the latest WTO figures.

• The EU is further committed to reducing its agricultural tariffs and subsidies in the Doha trade round, although Doha progress is currently stalled.

• The EU charges concessionary or zero rate tariffs on agricultural imports from many countries:

o It has a growing number of bilateral trade agreements which reduce the levels of tariffs EU importers actually pay.

o It unilaterally provides for significant reductions in its agricultural tariffs for 176 developing countries under its Generalised System of Preferences (GSP).

o Its ‘Everything But Arms’ (EBA) initiative provides duty-free, quota-free access for all products for the 49 least developed of the 176 developing countries which benefit from the GSP.

• The EU’s overall trade in agricultural goods is roughly in balance. It is a net importer of raw agricultural goods and a net exporter of processed agricultural goods. Its biggest agricultural importer is Brazil and its biggest agricultural export market is the USA.

• If the UK left the EU and negotiated to stay in bilateral customs union with it, it would have to retain EU tariffs for most categories of import. As regards subsidies it would be best to continue with the existing Pillar 1 (Single Farm Payment) and Pillar 2 schemes in the immediate future. But in the medium term the UK would be free to reform UK agricultural policy in the same way as it has unsuccessfully sought to do at EU level.

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