GUARANTEE THRESHOLDS AND THE COMMON AGRICULTURAL POLICY

In recent years an important development in the Common Agricultural Policy of the European Community has been the acceptance of the principle that the price guarantees can no longer be unlimited in nature, and that, if production exceeds a certain level, action should be taken to ensure that producers share in the responsibility for additional production. In 1981 the term ‘guarantee threshold’ was introduced to denote this level of production. Different mechanisms have been introduced in the various market regulations to give effect to the guarantee thresholds, and it is necessary for policy makers to realise that these mechanisms have different economic consequences. The case of milk is particularly instructive, for here the European Community in 1984 made a radical change by switching from the mechanism of reducing price support, if the guarantee threshold is exceeded, to a system of quotas for milk deliveries. Guarantee thresholds also exist for other products (cereals, processed fruit and vegetables, oilseeds) and in other cases there are analogous measures (sugar, wine, fruit in syrup, cotton). In the future development of the CAP, guarantee thresholds will continue to play an important role. How far can the Community expect to succeed in controlling its agricultural production by price or quantitative action, and what accompanying measures will be necessary?