Implemented in 1962 under Article 39 of the Treaty of Rome, the Common Agricultural Policy (CAP) was marked the birth of what was called "Green Europe".

It was originally a move to encourage farmers to produce more food following the post WWII shortages.

It was also intended to stabilise the EU agriculture market and guarantee EU farmers both a market for their produce and a 'fair' standard of living.

The CAP was based on three main principles:

• Financial solidarity: The EU was committed to jointly financing the policy.
• Market unity: A single market was created with a common system of marketing and pricing and free movement of produce.
• Community preference: EU producers were placed more favourably than competitors.

How it works

The policy is implemented by Common Market Organisations (CMOs) and is financed by the European Agricultural Guarantee and Guidance Fund (EAGGF).

Effectively guaranteeing farmers prices for their food, the CAP works in two ways:

• The EU intervenes when prices for agricultural produce drop below a certain level and buys up surplus EU stock until the price has gone up above the intervention level. Surplus produce is routinely destroyed or dumped very cheaply on markets outside the EU.
• The EU has an external customs tariff which requires levies to be imposed on agricultural products from non-EC countries, raising their prices.

Since its creation, the policy has played a key role in the development of the EU. Its first decade was a great success - agricultural production grew, the Europe of Six reached self-sufficiency and consumer prices remained reasonable.

But from the mid-70s onwards, surpluses in Community production began which could not be absorbed either internally or on the world market.

The high CAP support prices distorted the economies of food production encouraging farmers to produce quantity rather than quality.

The MacSharry reforms of 1992 began the process of reform and, according the European Commission the series of measures has produced encouraging results.

But more reform is needed for the CAP if poorer, agriculturally dependent countries such as Poland and Hungary are to be allowed into the EU. In addition, consumers still face unreasonably high prices for their food, money is wasted on food storage, export and destruction of surplus and CAP also encourages environmentally unsound farming practices.

The Agenda 2000 reforms currently under discussion build on the MacSharry reforms of the early 90s.

How it is financed

The CAP is funded by taxpayers from the EU member states as part of each government's contribution to the �65bn EU budget.

Around half the EU budget is spent on CAP even though less than 6% of the work force is employed in agriculture.

In 1996 taxpayers around the EU spent a total of 68.5bn euros (�45.6bn) to pay for the CAP - 56.2bn euros (�38.2bn) from the EU budget plus a further 12.3bn euros (�8.4bn) for additional farm spending by individual member states.

According to National Consumer Council figures consumers paid an extra 39bn euros (�26.5bn) through inflated food prices. By their calculations, for every 100 euros that farmers gain from the CAP, consumers and taxpayers pay out 142 euros.

Has it been successful?

Supporters of the CAP say it has succeeded in making the EU virtually self sufficient in all foods except tropical produce.

But critics argue that the consumer has paid dearly through taxes and higher prices for the benefits. They say it has also had an adverse impact on the environment, and distorted world trade.