The first significant effort to reform the CAP was the so-called Mansholt Plan. In 1968 the Commission, led by Sicco Mansholt, published the “Memorandum on the Reform of Agriculture in the European Economic Community” commonly referred to as the Mansholt Plan. Mansholt was one of the principal architects of the CAP, representing the Netherlands, and was the only agricultural minister party to the negotiations among member states. He was deeply committed to the project of European integration in agriculture and was considered a leading expert on the topic. His document contained a formal analysis of the situation in the Community. It built on Mansholt’s 1967 speech to the Council of Ministers in which he warned the Council that the CAP already required major changes, even though it was barely half a decade old. In particular, Mansholt noted that price supports had fostered a significant increase in production, which yielded massive surpluses that were incredibly expensive to dispose of. More troubling, these price supports failed to meet a key goal of the CAP,plastic garden pot as incomes did not increase for the majority of farmers. Despite a founding goal of the CAP being the improvement of farmer incomes, during the first decade of its existence not only had the income gap failed to diminish but income disparities had grown considerably within agriculture .
The UN’s Food and Agricultural Organization’s 1975 “State of Food and Agriculture” noted that in the previous decade there was “no evidence of any general narrowing of the gap between agricultural and non-agricultural incomes”, rather “the general tendency was for the gap to widen still further” . Despite the EU’s program being designed with the specific intention of improving farm incomes, the only developed nations where “large improvements” were observed were the United States and the Soviet Union . Mansholt believed that the fundamental problem in Europe was too many farmers. The Mansholt Plan observed that farms were, on average, small. The average farmer produced and sold very little, resulting in a low income. In addition, there remained too many elderly farmers with inadequate training for modern conditions. Mansholt asserted that CAP price policy encouraged and allowed marginal farms to stay in business. His plan’s core claim was that the only practical way to increase farmer incomes was for farms to become larger and more modern businesses. To make farms larger, there would necessarily have to be fewer of them. Achieving the objective of creating larger and more efficient farms, Mansholt argued, would meet the CAP’s goal of increasing agrarian incomes. Moreover, higher incomes would reduce dependence on high prices, allowing these prices to be lowered, which would in turn remove incentives to overproduce. The result, in the long run, would be lower EAGGF support costs and an efficient farming sector. Essentially, Mansholt’s plan was oriented around improving farmer incomes by removing farmers from the land in order to increase the average holding size.
Reduced production and CAP spending were uncertain outcomes that would only emerge in the long term. Mansholt asserted that 5 million people would need to be removed from agriculture between 1970 and 1980. His proposal included several options to encourage exit. Exiting farmers could be offered either retirement pensions or compensation and training for a new profession. To prevent rural depopulation, however, Mansholt suggested that regional plans be implemented to bring jobs to the countryside. For those remaining in farming, financial assistance would be available for the modernization and expansion of their farms. Finally, because the remaining farms would ostensibly be larger and more productive, he recommended that 5 million hectares be taken out of agriculture and devoted to re-afforestation. The removal of agricultural land would prevent a worsening of the surplus situation because it would limit the ability of farmers to both keep excess labor in farming and expand the areas devoted to certain crops known for higher yields, such as grains and sugars . If the land were permanently removed from production, it could not be bought up and used by the highly-productive farmers already benefiting from the current system. In addition to better controlling production, this initiative to both remove land from production and engage in a re-afforestation effort would help to reduce the Community’s dependence on timber imports. Despite its efforts to address the real crises facing the CAP, the Mansholt Plan was poorly received by farmer groups and politicians.
Farmer groups criticized it extensively, dubbing Mansholt “The Peasant Killer” because they perceived of the plan as an existential threat to their constituencies. For their part, politicians, wary of farmer voting power and the sway of agricultural lobbies, declined to engage in formal discussions of the plan. One issue that made discussion difficult from the start was that Sicco Mansholt’s understanding of the family farm was very different from that of key member states. Mansholt’s plan aligned with the Dutch assessment of a family farm as a unit that could support a family when run professionally, using modern techniques. The other member states saw the family farm as the key socio-cultural institution of Europe’s countryside, thus requiring its preservation. To the non-Dutch member states, Mansholt’s plan portended the destruction of the family farm as they knew it, thus rendering the plan politically unpalatable and fundamentally unacceptable. The fundamental problem, though, was that Mansholt undertook his reform initiative at a time of politics as usual. In 1968, when his memorandum was published, there were no ongoing trade negotiations. Moreover, not only was there no looming enlargement, but the prospects of accession in general seemed grim, with French President Charles de Gaulle blocking British membership. Paradigmatic reform, like the Mansholt Plan proposed, is essentially impossible to achieve under politics as usual. Mansholt’s plan faced strong resistance from farmers, and there was no disruptive event to overcome this resistance. Even though Mansholt did not take on the issue of surpluses directly and instead focused on the size of the farming community, he was unable to overcome the refusal of other key actors to accept the need for CAP reform. For these reasons,draining pots the fundamental problems plaguing the CAP’s operation carried on into the ensuing decades. The CAP’s unresolved production problems and their associated financial expenditures continued to build in the years following Mansholt’s unsuccessful initiative. The high cost of disposal was all the more alarming, given that in 1970 the CAP accounted for 75% of the Community’s budget. A new funding agreement for the CAP which was reached in 1969 and would be implemented in 1975, would provide much needed stability for the financing of this incredibly expensive program. Previously, national contributions to the Community were settled through acrimonious negotiations. Under the new plan, the CAP, and by extension the Community, would have its own resources. Specifically, levies on agricultural imports and customs duties were to accrue to the Community.
National value added tax receipts, up to a maximum VAT rate of 1%, would meet expenditures in excess of what could be covered by revenue from the levies . Due to delays in harmonization of the member states’ VAT systems, the VAT component of the financing was not implemented until 1979. Essentially, this financial program served to prop the CAP up without fixing it by providing a large, dedicated source of funding. Overproduction, and the associated costs, continued to drive up spending. By 1986, CAP annual spending had reached 56 billion ECU , up from an average of 30 billion ECU between 1979 and 1981. The 1984 Fountainebleu agreement attempted to stabilize expenditures in agriculture by limiting spending increases to 2% annually. The agreement, however, provided no incentive to compel individual farmers to cut back on production. In the wake of limited change, production continued unchecked, and overall expenditure continued to increase at a rate of 18% per year. By 1987, the CAP was violating the policy’s own financial regulations by running a budget deficit between 4 and 5 billion ECU, which, at the time, “was concealed through cleaver accounting” . Despite the swelling agricultural budget, farmers did not necessarily become richer. Rather, most farmer incomes held steady or declined because these new funds were directed towards costs associated with exports and/or maintaining the growing surplus. This decline in farmer incomes made reform even more difficult, particularly any proposals that would cut prices, since this strategy would hurt farmer incomes that were already not improving, despite a growing CAP budget. Yet, other than a major overhaul of the CAP, cutting prices paid to farmers for their production was the quickest solution for the CAP’s twin problems of out of control spending and excess production. The 1988 Stabilizer Reform was negotiated under politics as usual. Enlargement was not a pressing issue, as Spanish and Portuguese accession had been completed two years prior, and the next round of enlargement would not be until 1995. Although the Uruguay Round had been launched in 1986, negotiations were slow to get underway, and it was not yet clear that the CAP was playing a key role in forestalling progress. With farmer interests dominating CAP policy making, only incremental change was possible.
The CAP would be patched up by the 1988 Stabilizer Reform, rather than fundamentally overhauled.François Mitterrand and Helmut Kohl were facing major elections. In Mitterrand’s case, he was attempting to prevent a strong challenge from his prime minister, Jacques Chirac, in the 1988 presidential election. Both Mitterrand and Chirac “believed that the agricultural vote would play a crucial role in the election outcome” and thus were reluctant to challenge farmer preferences9 . In Germany, the Christian Democratic Union /Christian Social Union was facing tighter Länder elections in two states with significant agricultural populations, and believed that they would lose votes if they hurt farmer interests. Kohl and his party therefore had good reason to be reluctant to cross the farmers, as German farmers had habitually sanctioned the CDU/CSU in elections over agricultural policy. To address the crisis, Germany and France each proposed price cuts of no more than 3% and a grain production ceiling of 165 million metric tons. This plan, however, would do little to address the actual problems plaguing the CAP, as the proposed ceiling would allow for a 6 percent increase in production over production levels that were already considered to be unsustainable. Only after reaching that point would production penalties be applied. In short, the Franco-German plan proposed little change to existing price supports with minor penalties, at best, for overproduction. It thus did little to address the budget problem. The UK, supported by Denmark, represented the opposite end of the spectrum on CAP reform. Given that British farmers were among the largest and most efficient in the Union, Prime Minister Margaret Thatcher viewed the CAP primarily as a means by which the UK was forced to support less efficient competitors. Just a few years prior to this reform, Thatcher had negotiated the UK rebate, essentially awarding the UK a refund for money they paid into the EU. The rationale for the rebate was that the UK got back from the EU far less than it paid in, with the CAP being the main cause. Thatcher proposed a 15% price cut for cereals in years in which production was in excess of an established ceiling and also advocated for a producer tax, called a co-responsibility levy, which would help defray the costs of export subsidies and surplus storage. Ultimately, the final agreement contained a 3% price cut for cereals, as France and Germany preferred, along with the co-responsibility levy that took effect only when cereal production exceeded 160 million tons . Beyond cereals, which was among the more contentious commodities, a system of production ceilings and co-responsibility levies was adopted for the other major crops. However, the ceilings were set so high, and the fines so low that no change in production practices would result. Ultimately, the reform did little to address the main budgetary issue, however, as it was estimated that “no savings would result until 1990, if at all” . Because of strong British and Danish resistance to contributing even more to an out of control budget, “Germany agreed to contribute an extra 5 billion ECU over a five-year period, representing a 30% increase in their net annual budget contribution” .