”Fortress Europe” in long-term perspective: agricultural protection in the European Community, 1957-2003

Since its inception, the European Union’s Common Agricultural Policy (CAP) has been discussed controversely. Data from the OECD and the World Bank show that the protectionist effects of the CAP between the 1960s and the 1980s were larger than those of its national predecessors. Moreover, there is evidence that already the piecemeal reforms of the 1980s reduced the level of protection and support in the EU, that is prior to the MacSharry reform of 1992. The history of European integration is usually told as a success story. Countries that used to fight against each other for centuries decided to cooperate politically as well as economically and established supranational institutions. More than half a century after its foundation, the European Union forms an umbrella under which its member states pursue common interests or compete peacefully for resources and markets. At least for the core of the states that joined the European Union before the turn of the century, the very idea that neighboring states take up arms to resolve conflicts is hardly conceivable. By all political standards this is indeed a tremendous success. This historical achievement, however, did not come without cost. As numerous states have to coordinate their decisionmaking, costly institutions emerged to manage the European Union. The notorious 'bureaucrats in Brussels', though, cost the European taxpayer not more than 0.06 per cent of the combined gross national income (GNI) of the EU member states. Even if some bureaucratic excesses may call for rationalization, the EU's political coordination costs are quantitatively negligible. For an assessment of the true costs of the European Union it is not sufficient to consider administration costs alone. A more interesting issue is whether the policies pursued by the EU caused costs that feasible alternatives would not have had. In this respect the EU's Common Agricultural Policy (CAP) comes immediately to mind. In the first three decades of the EU it was 1 Throughout this article the term 'European Union' will be used for its predecessors as well: EEC European Economic Community and EC European Community. I would like to thank the German Historical Institute Paris for generous funding of this research project and Carine Germond, Fernando Guirao, Markus Hofreither, Cathérine Moreddu, Katja Seidel and Stefan Tangermann for very helpful comments on earlier drafts of this paper and Michael Buchner and Valentin Kreilinger for very able research assistance. All remaining errors are of course my own responsibility. 2 Calculated from European Commission, EU Budget 2008: Financial Report, Office for Official Publications of the European Communities, Luxembourg, 2009, pp. 77-83. the CAP that received by far most public attention, to an extent that the CAP seemed at times to be nearly congruent with EU politics. This was mirrored by the EU budget, the expenditure side of which was (and still is) dominated by the CAP, with its share peaking at 90 per cent in 1970. Yet the CAP cost European consumers and taxpayers much more than what was visible in the EU budgets. European farmers enjoyed high protection levels against cheaper imports and even received subsidies to export their production surpluses. This may be interpreted as a huge redistribution program from the non-agricultural sectors to agriculture. In total, however, the costs borne by taxpayers and consumers were larger than the farmers’ benefits because high prices crowded out consumer demand and the subsidized expansion of European agriculture bound labor and capital resources that might have been used more productively in other parts of the economy. Hence the CAP was not just a zero-sum game. The purpose of this paper is to present first results of a larger exercise aimed at estimating the full costs of the CAP, thus supplementing historians' EU success stories with the sober results of the cost side. Within the EU taxpayers and consumers incurred these costs while farmers benefited. Outside the EU the CAP was criticized for its protectionist effects. In this paper, we are particularly interested in the degree of agricultural protection caused by the CAP and its development over the last half century. This will allow us to assess the validity of two arguments that are often repeated. First, that the EU's Common Agricultural Policy just continued national agricultural policies, and second, that the MacSharry reform of 1992 led to a substantial reduction of agricultural protection in the EU. The empirical backbone of this undertaking are two databases measuring agricultural protection set up by the Organization for Economic Co-operation and Development (OECD) and the World Bank, respectively. While the World Bank database has not yet been exploited for historical research, that of the OECD has only very recently been used by economic history research, in a pioneering article by Giovanni Federico. From a conceptual point of view the OECD database is ideal for the purposes pursued here. Its drawback, however, is that it starts only with 3 EAGGF Guarantee Section plus related structural funds, calculated from ibid., p. 78. 4 M. TRACY, Government and Agriculture in Western Europe, 1880-1988, 3rd ed., Harvester Wheatsheaf, New York, 1989, p. 362; G. THIEMEYER, The failure of the Green Pool and the success of the CAP: long-term structures in European agricultural integration in the 1950s and 1960s, in: K.K. PATEL (ed.), Fertile Ground for Europe? The History of European Integration and the Common Agricultural Policy since 1945, Nomos, Baden-Baden, 2009, pp. 47-59, here pp. 53-54. 5 G. FEDERICO, Was the CAP the worst agricultural policy of the 20th century?, in: PATEL (ed.), op. cit., pp. 257-271.