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The Common Agricultural Policy (CAP) is a set of rules and regulations in the EU that has been in place for forty years. It was established as part of the Treaty of Rome, Articles 38-47.

It had five founding aims:

Essentially, the CAP guarantees that farmers will be able to sell their produce at a certain price. Over half of the EU budget is spent on this policy, despite a recent reduction in spending. This money, of course, comes from the taxpayers.

Because farmers know they can sell their produce at a certain price, they are encouraged to overproduce by this policy. This led to the famous butter mountains and wine lakes of unwanted produce seen in Europe during the '80s.

There are other problems with the CAP. Many countries that may be coming into the EU (such as Poland and the Czech Republic) have inefficient rural sectors - the other member states of the EU will have to increase their taxes or redirect funds from elsewhere to "finance" these countries. These countries will not be encouraged to maximise their efficiency either (farmers are paid per hectare, not per unit of produce) - the farmers are existing in a protected environment from the economic climate. As such, they are not best positioned to compete in world markets.

It should also be noted that the price set by the EU is above the market equilibrium price - consumers are paying more than they would be where the policy not in place.

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