EU Agricultural Domestic Support: Overview
June 7, 2021
and Comparison with the United States
Randy Schnepf
The European Union (EU) is one of the United States’ chief agricultural trading partners and a
Specialist in Agricultural
major competitor in world markets. Historically, the United States and the EU have provided
Policy
significant government support for their agricultural sectors. Significant structural differences in

their respective farm sectors have helped to shape differences in their farm policy. The United
States has double the farmland base than that of the EU (over 1 billion acres versus 418 million

acres, respectively). The EU has five times as many farms, at 10.6 million with an average size of
39 acres, compared with 2 million U.S. farms averaging 485 acres. As a result, EU outlays per acre appear much larger than
in the United States, whereas U.S. outlays per farm appear much larger. The EU’s small size of farm holdings, substantially
larger number of farms relative to the United States, and larger share of rural population (27% versus 18%) ha ve all played a
role in forming EU farm policy as compared with the United States.
In the United States, federal farm policy traditionally has focused on price and/or income support programs concentrated on
row crops, including grains, oilseeds, and cotton, as well as sugar and dairy. In contrast, the EU—under its Common
Agricultural Policy (CAP)—provides extensive support to a broader range of farm and food products, including livestock
products and fresh and processed fruits and vegetables. The EU tends to have a stronger rural development emphasis and
allows frequent exemptions for identifiably small farming units from certain cross compliance restrictions and payment
limitations.
Since the mid-1990s, both regions have reoriented their domestic agricultural policy toward less-market-distorting policies in
response to internal budget pressures and international trade commitments. By 2013, the EU had grown to 28 European
countries with 508 million people—including the economically poorer countries of Eastern Europe where agriculture remains
an important part of the economy. EU policymakers faced pressures to reform domestic agricultural policy due to this steady
growth. In January 2020, the United Kingdom—the second largest net contributor to the EU budget—withdrew from the EU,
leaving 27 countries (EU-27) with roughly 450 million people and somewhat reduced budgetary resources.
Several policy trends have emerged in the EU and the United States, including the following:
 Traditionally, the United States uses less overall trade-distorting support (OTDS) than the EU, although the
EU has made substantial reductions in the volume of OTDS. Since 2011, OTDS outlays (as notified to the
World Trade Organization [WTO]) for the EU and United States have been near parity.
 In both the EU and the United States, support for less-distorting noncommodity-type programs (e.g.,
conservation, rural development, agroforestry, nutrition, and climate) has increased substantially.
 When measured by producer subsidy equivalent (PSE) as a share of total gross farm receipts, support has
been trending lower for both the EU and the United States. As of 2019, the EU’s share (19%) remained
above the U.S. share (12%).
 U.S. consumers have received net benefits from agriculture-based support programs (including domestic
food aid), whereas EU consumers generally have transferred more support to agricultural producers than
they have received in offsetting benefits—that is, the EU’s consumer subsidy estimate (CSE) is negative—
although the net transfer has been declining over time as a share of gross farm receipts.
Large-scale ad hoc payments made by the United States during 2018 and 2019 in response to trade disputes, and in 2020 in
response to food chain disruptions associated with the Coronavirus Disease 2019 (COVID-19) pandemic, could result in
substantial increases in U.S. domestic support notifications—particularly market-distorting-type outlays—to the WTO
starting in 2018. In contrast, the European Commission’s proposed CAP reforms for 2021-2027 emphasize sustainable
agricultural production that supports greater biodiversity while addressing environmental and climate concerns. Details on
implementation, measurement, and enforcement have yet to be finalized, and the potential for effectively a chieving the
environmental and climate goals have yet to be demonstrated. The CAP reform proposals—if implemented—would appear
likely to increase the share of CAP outlays to less-market-distorting programs (i.e., green box programs) at the expense of
OTDS outlays.
Because the United States and the EU figure prominently in the development and use of global agricultural policy,
information comparing their farm support programs may be of interest to Congress as the United States considers
reauthorization of the domestic farm bill by 2023 and engages in international trade negotiations.
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Introduction
The United States and the European Union (EU) have large, diverse, and economical y important
agricultural sectors. Both political entities provide significant government support to their
agricultural sectors; however, the nature and extent of their policy interventions differ markedly.
In addition, each entity’s agricultural policy regime has changed substantial y over the years.
Since the mid-1990s, both regions have reoriented their domestic agricultural policy in response
to internal budget pressures and commitments to international trade rules governing the use of
domestic support programs—based largely on the World Trade Organization’s (WTO’s)
Agreement on Agriculture (AoA), which encourages greater use of less-market-distorting
policies.1
EU policymakers have faced additional pressures to reform domestic agricultural policy, in
particular due to the EU’s steady growth from 6 European countries with 167 mil ion people in
1957 to 28 European countries with 508 mil ion people by 2013—including most of the
agricultural y intensive but economical y poorer countries of Eastern Europe. In January 2020,
the United Kingdom (UK)—the second largest net contributor to the EU budget2—withdrew from
the EU, leaving 27 member states with roughly 450 mil ion people and somewhat diminished
budgetary resources.3
The EU member states share a Common Agricultural Policy (CAP). This report focuses on the
current EU-27 and the historical development of its farm policy, as wel as proposed reforms for
the 2021-2027 budget period.
In comparing the agricultural sectors and policy frameworks of the United States and the EU, this
report first notes the importance of trade between the two entities. Second, it describes some of
the major differences in agricultural and geopolitical settings that underlie and drive the policy
frameworks for supporting their agricultural sectors. Third, the report provides a short recounting
of the historical context that produced the current policy regimes in each entity, followed by an
overview of the current (and proposed) agricultural policy structure in both the EU and the United
States. The final section compares outlays under each entity’s agricultural support programs
based on two international data sources: annual domestic support notifications to the WTO and a
set of comparative policy measures published annual y by the Organisation for Economic Co-
operation and Development (OECD).4
The EU and United States Are Important Trading Partners
The EU is one of the United States’ chief trading partners and a major competitor in world
markets for goods and services, including farm products (Table 1). As a destination, the EU-27
accounted for 16% of total U.S. merchandise export value and 7% of U.S. agricultural export
value during 2015-2020. The EU-27 ranked as the fifth most important destination for U.S.
agricultural products behind Canada (17%), Mexico (13%), China (13%), and Japan (8%) during

1 T he Agreement on Agriculture (AoA) was entered into force on January 1, 1995, as part of the establishment of the
World T rade Organization (WT O). Its guidelines and restrictions on domestic support are described in the section
“Comparing Farm Support: T he EU and United States.”
2 David Blandford and Alan Matthews, “EU and US Agricultural Policies: Commonalities and Contrasts,” EuroChoices
vol. 18, no. 1 (2019) (hereinafter Blandford and Matthews, “ EU and US Agricultural Policies,” 2019).
3 For information on the United Kingdom’s (UK’s) withdrawal from the European Union (EU), see CRS Report
R46730, Brexit: Overview, Trade, and Northern Ireland.
4 Both of these data sources are publicly available and described in detail later in this report.
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that same period. On the other side of the trade ledger, the United States accounted for 17% of
total EU-27 merchandise exports and 20% of EU-27 agricultural exports.
As a source for U.S. agricultural-product imports, the EU’s 19% share ranked second, behind
Mexico (20%), ahead of Canada (18%), and with China (3%) a distant fourth. In contrast, the EU
imports 9% of its agricultural products from the United States.
Table 1. Average Trade Values for 2015-2020: EU-27 vs. United States
(bil ion U.S. dol ars)

U.S. Trade with

EU-27 Trade with

World
EU-27
EU Share

World
U.S.
U.S. Share
Exports

Total Merchandisea
$1,306
$203
16%
$2,234
$378
17%
Subtotal: Agricultureb
$148
$11
7%
$196
$24
12%
Imports

Total Merchandisea
$2,353
$397
17%
$1,995
$233
12%
Subtotal: Agricultureb
$134
$26
19%
$134
$11
9%
Source: Data assembled by CRS from Trade Data Monitor database, April 22, 2021.
Notes:
a. EU merchandise trade data are al commodities of al chapters of the Harmonized System (HS) code for the
EU-27; the United Kingdom is excluded.
b. EU agricultural trade data are al agricultural products for chapters 1-24 of the HS code for the EU-27.
Key Sectoral Difference: The EU Has More—but Smaller—Farms
Identifying the structural differences in the respective farm sectors of the United States and the
EU is a first step in understanding the differences in their agricultural policies. Perhaps the most
important difference is the contrast between land area and farm numbers. The United States has
more than double the farmland base (over 1 bil ion acres, more than half of which are pasture,
versus about 418 mil ion acres in the EU), while the EU has more than five times the number of
farms (10.6 mil ion versus 2.0 mil ion) spread across its 27 member countries (Table 2). As a
result of its smal er area but comparable support outlays, EU domestic support outlays per acre
are nearly double the United States ($237 versus $139), whereas U.S. outlays per farm are over
six times larger than in the EU ($66,385 versus $10,106).
Despite its apparent large farm population, the number of farm holdings in the EU has been
declining recently. In 2005, following the 2004 accession of 10 new EU member states, the EU
had an estimated 14.5 mil ion farms.5 By 2013, the number of EU farm holdings had declined to
an estimated 10.8 mil ion (the most recent data point) with an average size of 43 acres.6 This
contrasts with the United States, where 2.1 mil ion farms with an average size of 485 acres per
farm were in operation in 2020.7

5 European Commission, Eurostat, downloaded on May 11, 2016, at http://ec.europa.eu/eurostat.
6 T he 10.8 million farm population of 2013 is for the EU-28. Excluding the UK reduces the total number of farms to
10.6 million for the EU-27. Data are from the EU 2013 Census of Agriculture; results from the next EU agricultural
census for 2020 are not yet publicly available.
7 CRS calculated average farm sizes based on data defined in Table 2.
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Table 2. General Economic Indicators: EU vs. United States
Indicator
EU-27

United States
Population (million, July 2021)
450.1
321.4
Rural Share (%)
27.3%
18.4%
Population Density (capita/km2)
113
37
GDP-PPPa (U.S. $B, 2019)
$19,886
$20,525

Agriculture Share of GDP-PPP (%, 2017)
1.6%
0.9%
GDP-PPP per capita (2019 $)
$44,436
$62,530
Total Land Area (million acres, 2020)
987.8

2,260.4
Agricultural Land, million acres (%)
417.9 (100%)
1,002.8 (100%)

Pasture, mil ion acres (%)
135.4 (32%)
606.3 (61%)

Seasonal Crops, mil ion acres (%)
253.1 (61%)
389.8 (39%)

Tree/Permanent Crops, mil ion acres (%)
29.4 (7%)
6.7 (1%)
Labor Force (million, 2020)
204.0
165.5
Agricultural Labor Force (mil ion, %)
21.2 (10.4%)b
6.0 (3.6%)c
Agricultural Share of Employment (%, 2018)
4.0%
1.6%
Number of Farmsd (million)
10.6 (2013)
2.0 (2020)
Average Farm Size (acres)
39.3 (2013)
485.1 (2020)
Major Livestock Population (million head, 2020)
305.5 (100%)
170.7 (100%)
Cattle (mil ion head)
76.2 (25%)
88.5 (52%)
Dairy Cattle (mil ion head)
20.5 (7%)
9.2 (5%)
Hogs (mil ion head)
146.2 (48%)
67.7 (40%)
Sheep (mil ion head)
62.5 (20%)
5.2 (3%)
Poultry Production (million tons, 2020)
12.4
17.5
OTDS Outlays (2020 $B, 2015-2017 avg.)e
$16.3
$17.7
Green Box Outlays (2020 $B, 2015-2017 avg.)e
$73.5
$127.5
OTDS + Green Box Outlays (2020 $B, 2015-2017 avg.)e
$89.8
$145.2
Per acre (U.S. $)
$215
$145
Per farm (al farms included) (U.S. $)
$8,451
$70,255
Source: Assembled by CRS from various sources, including Organisation for Economic Co-operation and
Development (OECD), Agricultural Policy Monitoring and Evaluation 2020; Central Intel igence Agency, CIA Fact
Book; World Bank, World Development Indicators; United Nations, FAOSTATS; European Commission, Eurostat; and
U.S. Department of Agriculture (USDA), Farm and Land in Farms: 2020 Summary, February 2021.
a. GDP-PPP = Gross Domestic Product in Purchasing Power Parity, as calculated by the World Bank.
b. EU 2013 Census of Agriculture; EU-27 data for agricultural labor force and number of farms. The results
from the next EU agricultural census for 2020 are not yet publicly available.
c. USDA 2017 Agricultural Census; includes ful - and part-time producers, hired managers, and hired labor.
d. The U.S. Agricultural Census defines a U.S. farm as any place from which $1,000 or more of agricultural
products were, or normal y would be, produced and sold during the census year. According to Eurostat, a
European agricultural holding is a single unit, both technical y and economical y, that has single management
and produces agricultural products. The holding also may provide other supplementary (nonagricultural)
products and services.
e. Overal Trade-Distorting Domestic Support (OTDS) and green box outlays are described later under WTO
notifications. EU data are for the EU-27 plus United Kingdom. EU euros per dol ar are converted to U.S.
dol ars using the ERS, USDA, exchange rate; data are then converted to 2020 dol ars before averaging.
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The technological scale of agricultural production varies dramatical y across the EU’s 27 member
states. Many of the EU’s Eastern European member states have been slow to adopt new
technology, in large part due to the extremely smal size of their agricultural holdings. For
example, Romania had an estimated 3.6 mil ion farm holdings in 2013, with an average size of
about 11 acres. Poland had another 1.4 mil ion holdings averaging about 28 acres each, and Italy
had over 1 mil ion farms and an average holding of about 37 acres. These smal farm sizes limit
the benefits certain EU farms could realize from the economies of scale available to advanced-
technology agricultural production.
The EU also has a much larger commercial animal population—nearly double that of the United
States (306 mil ion head of cattle, dairy cows, hogs, and sheep in 2020 compared with 171
mil ion in the United States) but with smal er average animal numbers per farm with animals.
In general, the EU’s smal size of farm holdings but substantial y larger number relative to the
United States, substantial y larger presence of livestock, greater population density, and general y
larger share of rural population have played a strong role in the formation of EU farm policy as
compared with the United States. The EU tends to have stronger rural development and
environmental emphases but al ows frequent exemptions for identifiably smal farming units from
certain cross compliance restrictions and payment limitations.
What Is the European Union (EU)?
The EU is a political and economic partnership of European countries. It has been built up over time through a
series of binding treaties.8 The EU’s origins date from 1951 to 1952, when six Western European countries in the
aftermath of World War II embarked on the European integration project to promote peace, stability, and
economic recovery. In order to join the EU, countries must first meet a set of established criteria, including having
a functioning democracy and market economy. Currently, the EU consists of 27 European countries.9
Although each member of the EU remains a sovereign country, member states have agreed to share sovereignty in
specified areas. On many economic and social issues, EU member states have largely pooled sovereignty, and EU
decisionmaking has a supranational quality. On issues such as foreign policy and defense, EU member states seek
to cooperate where possible, but decisions require unanimous agreement among al 27 countries, and national
governments thus retain greater control.
Over the years, the EU has sought to harmonize laws and adopt common policies in an increasing number of
areas. EU member states share a customs union; a single market in which goods, people, and capital move freely; a
common trade policy; and a Common Agricultural Policy (CAP). Nineteen EU member states share a common
currency (the euro), a common central bank (the European Central Bank), and a common monetary policy. These
19 member states are referred to col ectively as the “eurozone.” They do not have a common fiscal policy, and
member states retain control over decisions about national spending and taxation —subject to certain conditions
designed to maintain budgetary discipline. Twenty-two EU member states (and four other European countries)
participate in the Schengen area of free movement in which internal border controls have been eliminated.
Key EU institutions include the fol owing:

The European Council, composed of EU heads of state or government, acts as the strategic guide and driving
force for EU policy.

The European Commission functions as the EU’s executive. It is responsible for proposing legislation,
implementing decisions, upholding the EU’s treaties, representing the EU international y on many issues, and
much of the day-to-day running of the EU. It is composed of 27 commissioners; one serves as president while
the others hold distinct portfolios (the European commissioner for agriculture is currently Janusz
Wojciechowski). The directorates-general (DGs) and services under the commission are responsible for
policy areas—for example, the DG for Agriculture and Rural Development—and are each headed by a
director-general.

8 Table 3 provides a chronological list of EU enlargement and agricultural policy developments.
9 T he EU currently recognizes five countries as official candidates for membership—Albania, Montenegro, North
Macedonia, Serbia, and T urkey—and two countries as potential future EU candidates—Bosnia and Herzegovina and
Kosovo.
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
The Council of the European Union (also known as the Council of Ministers) represents the national
governments of member states. Different ministers from each country participate in council meetings
depending on the subject under consideration (e.g., agriculture ministers would meet to discuss farm
subsidies).

The European Parliament represents, and is directly elected by, citizens across the EU. It consists of 705
members.
Source: CRS Report RS21372, The European Union: Questions and Answers.
The Evolution of EU and U.S. Farm Programs
Comparisons of agricultural support outlays between the United States and the EU are
complicated by the difficulties inherent in defining what constitutes support—or even what
constitutes agriculture.10 U.S. and EU farm program support differs in size and scope, as wel as
in the manner in which the support is provided. Examples are below.
 In the United States, Congress develops and authorizes federal farm policy. In
contrast, the European Commission traditional y has developed EU agricultural
policy, largely outside of the legislative arena. It is since the Lisbon Treaty of
2009 that the European Parliament was given the power to amend agricultural
policy as proposed by the commission.
 The United States traditional y has focused its producer support programs on
dairy and row crops, such as grains, oilseeds, and cotton. In addition, the United
States has provided substantial support to the sugar sector via supply
management and import quotas. EU agricultural policy provides support to a
broader range of farm and food products than the United States—traditional row
crops, sugar, and dairy, as wel as livestock products and fresh and processed
fruits and vegetables—with more extensive cross compliance provisions.
Both the United States and the EU have relied on similar policy instruments to support their
respective agricultural sectors—commodity-specific, price-triggered supports; direct payments to
producers; supply controls; and border measures—although their implementation and the range of
affected commodities have been fairly different over the years. To fully appreciate the current
status of U.S. and EU farm policy, this section briefly reviews the origins and evolution of their
respective policies.11

10 For example, the single largest outlay under U.S. agricultural support notifications to the WTO is payments made
under the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. T he Organisation for
Economic Co-operation and Development (OECD) considers SNAP payments to be consumer subsidies, not producer
subsidies. Meanwhile, U.S. agricultural support totals exclude billions of dollars of tax credits to U.S. biodiesel
blenders and mandated biofuels usage under the Renewable Fuels Standard, which have provided substantial support
for the U.S. grain and oilseed sectors.
11 Table 3 provides a chronological list of EU enlargement and agricultural policy developments. U.S. farm policy,
described in more detail in other CRS reports, is mention ed briefly here to provide context for understanding the EU’s
farm policy evolution. For more information on U.S. farm policy, see CRS Report RS22131, What Is the Farm Bill?;
CRS In Focus IF11163, 2018 Farm Bill Prim er: The Farm Safety Net; and CRS Report R45730, Farm Com m odity
Provisions in the 2018 Farm Bill (P.L. 115 -334).
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Agricultural Policy Origins
Current U.S. farm policy has its origins in the Great Depression, when nearly 20% of Americans
lived in rural areas and derived their livelihoods either directly or indirectly from agriculture. As a
result, the initial focus of U.S. farm policy was supporting commodity prices and rural incomes.
EU farm policy began later, following the devastation of World War II and the creation of the
precursor European Economic Community (EEC) on January 1, 1958, based on the 1957 Treaty
of Rome.12 During the late 1940s and early 1950s, Europe confronted serious food shortages.
Although the shortages subsided by the mid-1950s, Europe remained a major importer of
foodstuffs wel into the 1970s. Thus, the EEC’s initial policy focus was on ensuring adequate
internal food supplies and supporting the rural economy.
The six-country EEC (France, West Germany, Italy, the Netherlands, Belgium, and Luxembourg)
established its Common Agricultural Policy (CAP) in 1962 based on three major principles:
1. a unified market in which there is a free flow of agricultural commodities with
common prices within the EU;
2. product preference for domestic production in the internal market over foreign
imports through common customs tariffs; and
3. financial solidarity through common financing of agricultural programs.
The CAP’s original objectives were to increase agricultural productivity, ensure fair living
standards for farmers, stabilize markets, and ensure food availability at reasonable prices.13 These
aims were achieved primarily by the EEC intervening in commodity markets to buy farm output
when market prices fel below agreed target prices. To prevent imports from undercutting the high
internal prices that resulted from the operation of the intervention buying system, the EEC levied
variable tariffs on imported agricultural products. The surpluses of agricultural products that
resulted from the high internal prices of the intervention buying system were reduced by export
subsidies. The system of intervention buying, import levies, and export subsidies was carried out
in various common market organizations (CMOs) for each of the different commodities: bananas,
cereals, floriculture, dried fodder, fruits and vegetables, hops, olive oil and table olives, flax and
hemp, eggs, pork, milk products, rice, seeds, sugar, tobacco, beef and veal, sheep meat and goat
meat, wine, poultry meat, and other agricultural products.
Encouraging Surplus Production
The United States was a major beneficiary of Europe’s large agricultural import needs during the
1940s and 1950s. Despite strong U.S. exports to Europe, by the late 1950s, technological
advances combined with relatively strong government price supports had led to the accumulation
of large U.S. stocks of grains and cotton. In response, U.S. farm policy instituted supply
management provisions in the 1960s, including acreage planting restrictions and large global food
aid donations for surplus removal.

12 In 1967, the European Economic Community (EEC)—along with the European Coal and Steel Community and the
European Atomic Energy Community—collectively became known as the European Community (EC), although the
EEC remained a legal entity in its own right. In 1993, the Masstricht T reaty established the modern-day EU, which
incorporated the EEC/EC.
13 T hese were the objectives for a common agricultural policy, enumerated in Article 39 of the 1958 T reaty of Rome,
establishing the six-country EEC.
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In the early 1970s, a global economic and commodity market crisis helped to draw down world
grain and oilseed reserves, sharply raised global commodity prices, and induced both the United
States and the EEC to increase support for their respective agricultural sectors.14 For example, the
United States instituted commodity-price targets linked to the cost of production, thus building in
a self-inflating aspect that encouraged increasing support outlays and concomitant agricultural
output independent of market conditions. Similarly, the EEC maintained internal support prices at
levels wel above world market conditions, thus isolating domestic producers from international
market signals.
Among the unintended consequences of the CAP were high prices for European consumers and
high budget expenditures. During the 1970s and 1980s, the CAP accounted for as much as 70%
of the total EEC budget. EEC trading partners criticized the CAP for distorting world markets and
interfering with global agricultural trade. By 1986, with the EEC having expanded to 12
members, the CAP’s support programs resulted in increasing budget outlays.
By the mid-1980s, price and income supports in the United States and the EEC had resulted in
overproduction and large stock accumulations (a substantial portion were government-owned).
Burgeoning EEC and U.S. supplies in the world’s two dominant grain stock holders swel ed
global stocks to record levels, dampened global commodity prices, and created intense budgetary
pressures for reform. By 1982, the CAP had successfully contributed to shifting the EEC from a
food deficit to surplus, and extensive use of export subsidies had increased the EEC’s share of
world food exports, often at the expense of U.S. exporters. In 1985, the United States responded
with its own export subsidy program—the Export Enhancement Program—to help protect U.S.
market share in international markets.15 The United States and the EEC recognized their dilemma
in precipitating an agricultural trade war but were hesitant to unilateral y undertake reforms for
fear of losing market share in the very competitive international marketplace.
The Mid-1980s Period of Market-Oriented Reforms
The United States began to slowly rein in direct farm support levels, starting with the 1985 farm
bil (P.L. 99-198), which lowered Commodity Credit Corporation price-support loan rates, froze
income support target prices and program yields used to calculate per-acre payments, and
introduced special marketing loan repayment provisions for rice and cotton to avoid government
stock ownership. Under the 1990 farm bil (P.L. 101-624), acreage eligible for income support
payments was reduced, and acreage set-asides were tied to end-of-season stocks, making them
mandatory when stocks were too high relative to usage.
By the early 1990s, with further enlargement looming, the EEC reduced its budgetary liability
(Table 3). The prospect of enlarging eastward toward larger countries with smal er and poorer
farm households heightened the urgency of reform. The EEC followed the United States by
initiating the MacSharry Reforms of 1992, which reduced internal support prices and
compensated for lower prices by making production-based (i.e., coupled) payments. In 1993, the
Maastricht Treaty established the modern-day EU, incorporating the EEC.

14 For more information, see Pete Riley, “Global Grain Markets in 1996: Shades of 1972 -74?,” U.S. Department of
Agriculture (USDA), Economic Research Service (ERS), Agricultural Outlook, AO-233, September 1996, pp. 2-6.
15 Karen Ackerman and Mark Smith, Agricultural Export Programs: Background for 1990 Farm Legislation , ERS,
AEGS 9033, 1990.
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The WTO Encourages Policy Reform
The legal texts of the WTO further crystal ized the drive to reform farm policy by moving away
from government supply management and toward a more liberalized market and trade
environment.16 The creation of the WTO in 1995 marked a turning point in the history of the
multilateral trading system by subjecting agricultural trade to essential y the same rules that
disciplined trade in industrial goods: WTO members committed to reduce the use of export
subsidies and domestic support to agriculture and to improve access to their markets.
The 1996 U.S. farm bil (P.L. 104-127) made substantial policy changes toward greater market
orientation. In addition to eliminating most planting restrictions, as wel as farmer-owned (but
government-financed) grain reserves, the bil replaced target-price deficiency payments (i.e., a
countercyclical income support program) with direct payments (i.e., a lump sum decoupled
payment) and extended the use of special marketing loan repayment provisions (first begun for
rice and cotton in the 1985 farm bil ) to other major program crops. This effectively curtailed the
U.S. Department of Agriculture’s (USDA’s) role in commodity storage and management.
The EU also continued to increase the market orientation of its own farm policy. The Agenda
2000 reforms further lowered support prices, replaced them with even larger production-based
direct payments, and required that some farmland be taken out of production. Budget disciplines
designed to reduce the growth in community spending on the CAP were established in 2002.
Two Pillars of the Reformed Common Agricultural Policy
In 2003, another round of CAP reforms continued the pattern of replacing government controls
with greater market orientation and established the two pil ars of agricultural policy that represent
the core of today’s CAP:
 Pillar I for direct payments and market and farm income support policies
(financed entirely from the EU budget); and
 Pillar II for rural development policies (co-financed with EU member states).17
The major component of Pil ar I is decoupled direct payments, which replaced the coupled,
production-based payments made under commodity-specific CMOs.18 Thus, support became
largely decoupled from current prices and production. EU member countries could temporarily
couple payments to production but had to move toward full decoupling. The 2003 reforms also
imposed a ceiling on Pil ar I spending—increases were limited to 1% per year in nominal terms
during the 2007-2013 EU budget period. In addition, the receipt of farm income support was
made conditional upon the farmer meeting an extensive array of new agricultural and
environmental norms introduced in 2003. This “conditionality” is analogous to conservation
compliance provisions in U.S. farm policy but is applied more extensively to include food safety,
animal and plant health, animal welfare, and other conditions.19 The budget for Pil ar II was
intended to more than double by 2013, but budget restrictions limited spending.

16 T he WT O was established on January 1, 1995, following the completion of the Uruguay Round of multilateral trade
negotiations in 1994. WT O legal texts are available at https://www.wto.org/english/docs_e/legal_e/legal_e.htm.
17 Rural development is broadly defined under the Common Agricultural Policy (CAP) and may be interpreted
differently among member states. See European Commission “ Rural Development,” at https://ec.europa.eu/info/food-
farming-fisheries/key-policies/common-agricultural-policy/rural-development_en.
18 Initially referred to as the single farm payment (SFP) by the Agenda 2003 reforms.
19 See CRS Report R46248, U.S. Farm Programs: Eligibility and Payment Limits.
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In 2004, the EU reformed the CMOs supporting hops and the Mediterranean commodities—
cotton, olive oil, and tobacco. In 2006, reform of the EU sugar program was initiated, culminating
with abolition of sugar quotas in 2017. The 2008 CAP Health Check built on the 2003 reforms. It
simplified the CAP’s direct aid system, established a process for shifting funding from direct aid
to rural development (referred to as modulation), clarified support for newly acceded countries,
and increased milk quotas, gradual y leading up to their abolition in 2015.20 Reform of the EU
wine sector began in 2008, including the end to the planting rights system by 2018. Final y, the
2008 CAP Health Check eliminated partial coupling for al but a few commodities (primarily
livestock) by 2012.
Table 3. Chronology of EU Enlargement and CAP Reforms
Year
Event
1951
The six-country European Coal and Steel Community formed (treaty signed in 1951; started operations
in 1952).
1957
Treaty of Rome establishes six-country European Economic Community (EEC): France, West
Germany, Italy, the Netherlands, Belgium, and Luxembourg (treaty signed in 1957; started operations in
1958).
1962
Common Agricultural Policy (CAP) first implemented based on (Pil ar I) high internal support
prices and effective border controls on imports. Policy objectives were to provide food security for
citizens of EEC member states and a fair living for farmers.
1973-
United Kingdom (UK), Ireland, and Denmark join the EEC in 1973. Greece joins in 1981. Spain and
1990
Portugal join in 1986 to form the EEC-12. East Germany is unified with West Germany in 1990.
1970s-
Crisis years.a Farmers respond to high internal price supports with bountiful production and large but
1980s
costly domestic surpluses. Specific measures put in place to help align production with market needs—
including export subsidies to push domestic surpluses into international markets—contribute to large
budgetary outlays and growing friction with international trading partners.
1992
MacSharry Reforms shift CAP’s policy focus from market to producer support, reduce support
prices, introduce set-aside to reduce output and production-based direct payments to compensate for
lower support prices, and take steps to protect traditional and regional foods.
1993
Maastricht Treaty establishes the European Union (EU), incorporating the EEC.
1995
Austria, Finland, and Sweden join to form the EU-15. Rural development programs introduced.
2000
Agenda 2000 reforms further reduce intervention prices (again compensated by further production-
based direct payments) and make rural development a second pil ar (Pil ar II) of the CAP.
2001
Everything but Arms Agreement gives al less-developed countries ful duty-free and quota-free
access to the EU for al their exports with the exception of arms and armaments. By mid-2000s, the EU
is the world’s largest importer of agricultural products from developing countries, importing more than
the United States, Japan, Australia, and Canada combined.
2002
CAP budget is fixed at 1% annual growth for 2007-2013.
2003
2003 Reforms establish decoupled direct payments—the single farm payment (SFP) based on historical
2000-2002 payments—with cross compliance based on animal welfare, environmental, and food safety
criteria. The SFP replaced the production-based payments of MacSharry and Agenda 2000 reforms.
2004
Reform of hops and Mediterranean commodities (cotton, olive oil, and tobacco).
EU-15 expands to the EU-25 with the addition of Poland, Hungary, the Czech Republic, Slovakia,
Slovenia, Estonia, Latvia, Lithuania, Cyprus, and Malta.
2006
Reform of the EU sugar program begins in July 2006.
2007
EU-25 expands to the EU-27 with the addition of Bulgaria and Romania. The EU farming population has
doubled to nearly 14 mil ion holdings since 2004 through new member accession.
2008
CAP Health Check of 2008 reforms simplify the SFP, abolish arable set-aside, and initiate dairy
reform, gradual y leading to abolition of milk quotas in 2015. Reform of the EU wine support programs
begin, including the end to the planting rights system by 2018 at the latest. Sugar quotas were set to be
abolished in 2017.

20 European Commission, “‘Health Check’ of the CAP,” at http://ec.europa.eu/agriculture/healthcheck/index_en.htm.
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Year
Event
2009
Lisbon Treaty enters into force and gives the European Parliament a say equal to that of the Council
of Ministers over the vast majority of EU legislation, including agricultural policy.
2013
Croatia joins to form the EU-28.
CAP Reform Post-2013, focused on the 2014-2020 budget period, further simplifies the CAP by
reducing licensing requirements and marketing standards, removing production constraints (particularly
for sugar started in 2006 and dairy and wine started in 2008), expanding environmental compliance for
Pil ar I payments, increasing flexibility for member states in shifting funding between Pil ars I and II, and
adding convergence criteria to establish minimum national average per hectare payments across al
members by 2020, among other changes.
2018
The European Commission introduces (June 1, 2018) a new round of CAP reform, “CAP Reform
Beyond 2020,” set to start on January 1, 2021, and focused on the 2021-2027 budget period. The
proposal includes significant cuts (-2.8%) to the CAP budget—primarily Pil ar II, rural development. The
reforms retain the core CAP structure but emphasize a higher level of environmental and climate
ambition.
2019
Due to ongoing negotiations between the European Parliament and Council of the EU, the provisional
start date of January 1, 2021, of the proposed CAP reform is moved to January 1, 2023. To al ow for
continued payments to farmers and other CAP beneficiaries, a transitional regulation is introduced
for 2021 and 2022 that extends most CAP rules in place during the 2014-2020 period.

The commission introduces (December 11, 2019) the European Green Deal.
2020
The UK withdraws from the EU in January 2020, reducing the number of member states to 27.
The commission introduces (May 20, 2020) the Farm to Fork Strategy and Biodiversity Strategy to
reorient CAP functionality with the European Green Deal.
2023
Once the new legal framework for the CAP Reform Beyond 2020 package has been approved, CAP
strategic plans are due to be implemented in al EU countries starting on January 1, 2023.
Source: Compiled by CRS from various sources.
Note:
a. European Commission, Agriculture and Rural Development, “The History of the CAP,” downloaded on
May 9, 2016, at http://ec.europa.eu/agriculture/cap-history/index_en.htm.
CAP Reform: 2013 to Present
The EU follows a seven-year budget cycle—referred to as a multiannual financial framework
(MFF). The EU’s agricultural policy aligns with and is funded primarily from the MFF.21 The
MFF represents the overal size of the EU budget. As such, it defines both the spending ceilings
for the various programs financed by the EU, including the CAP, and how the EU budget is to be
financed. The current MFF covers the seven-year period of 2021-2027.
The two most recent rounds of CAP reform have aligned with MFF budget cycles: the 2013 CAP
reform corresponded with MFF 2014-2020, and the newest CAP Reform Beyond 2020 aligns
with the MFF 2021-2027 period. These two CAP reform initiatives have incorporated additional
agriculture-related conditionality measures linked to meeting EU goals with respect to the
environment, sustainability of food systems, animal welfare, food safety, and climate. Thus, CAP
benefits have become increasingly linked to producer compliance with these overarching, EU-
wide policy goals. In addition to increased cross compliance, these two recent reforms have tried
to simplify the policy and regulatory framework associated with CAP benefits.

21 Member states can provide additional funding for certain Pillar II intervention activities described in the section
“Pillar II: Rural Development Programs.”
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The 2013 CAP Reform
The 2013 CAP reform further simplified the CAP by reducing domestic licensing requirements
and marketing standards and removing al remaining production constraints (particularly for
sugar, dairy, and wine). In addition, it expanded environmental compliance for Pil ar I payments,
increased flexibility for member states in shifting funding between Pil ars I and II, and added
convergence criteria to establish a minimum national average per hectare payment across al
members by 2020, along with other changes.22 The 2013 CAP reform provided the structure for
the EU’s current CAP policy regime.
CAP Reform Beyond 2020
In June 2018, the European Commission presented several legislative proposals to reform the
CAP for the EU budget period 2021-2027.23 Following the commission’s submission of its
proposal, negotiations over the final CAP reform package and its timeline began in the European
Parliament (representing EU citizens) and the Council of the EU (representing member states).24
The Parliament and Council can each amend or modify the commission’s proposal but must agree
on any changes before it can become EU law.
Initial y, the CAP reform for MFF 2021-2027 was targeted for implementation on January 1,
2020. However, interinstitutional negotiations became prolonged, and the onset of the COVID-19
pandemic further delayed negotiations. To avoid any gap in CAP support between the MFF 2014-
2020 and the MFF 2021-2027, the commission proposed a transitional regulation to extend the
previous CAP through 2022. Thus, the CAP reform package is expected to start on January 1,
2023.25 The transitional regulation extends most of the CAP rules that were in place during the
2014-2020 period and includes new elements to encompass stronger green ambitions and ensure a
smooth transition to the future CAP framework, as set out in the commission’s proposals.
Because the commission’s 2018 CAP reform proposal—which builds on the current CAP
provisions—has yet to be finalized, it is discussed in the section “The European Commission’s
2018 CAP Reform Proposal,” following the next section, which describes current CAP funding.
Current CAP Funding
Agriculture is one of the principal policy areas where al EU member states sacrifice national
sovereignty in favor of a common policy—the CAP—which governs agricultural policies and
programs for the EU’s 27 member countries. This section briefly describes the current CAP and
its funding levels.26

22 Historically, per-acre payments have been much smaller in acceding countries, particularly in Eastern Europe.
23 Albert Massot and Francois Negre, Towards the Common Agricultural Policy beyond 2020: comparing the reform
package with the current regulations, European Parliamentary Research Service (EPRS), PE 617.494, September 2018.
T he European Commission’s CAP reform package includes three principal legal texts: COM (2018) 392, covering the
proposal’s architecture and rules and the types of interventions t o be implemented by EU member states; COM (2018)
393, proposing financing, management, and monitoring of the reformed CAP; and COM (2018) 394, proposing the
amendments to previous law needed to enact the reform proposal.
24 Blandford and Matthews, “EU and US Agricultural Policies,” 2019.
25 Rachel Rossi, Transitional Provisions for the CAP Post 2020, EPRS, December 2020. T he previous round of CAP
reforms for the multiannual financial framework (MFF) 2014-2020 underwent a similar delay, as it was decided in
2013 and implemented in 2015.
26 T his section draws heavily from various informational reports published by EPRS and OECD, “Chapter 9: European
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As discussed earlier in this report, the CAP is focused on three long-term priorities:
1. Promoting viable food production with a focus on agricultural income,
agricultural productivity, and price stability;
2. Promoting sustainable management of natural resources and climate action, with
a focus on greenhouse gas emissions, biodiversity, soil, and water; and
3. Promoting balanced territorial development, with a focus on rural employment,
growth, and poverty in rural areas.
Although the long-term policy goals have remained fairly consistent, the specific nature and
program features used by the CAP to achieve such goals have evolved significantly since the
1990s, shifting from support that intervened heavily in the marketplace to more decoupled, better
targeted, and more environmental y friendly support. For example, in 1992, market-related
support measures represented over 90% of total CAP expenditures, driven by domestic purchases
at high internal support prices and export subsidies to push domestic surpluses into international
markets.27 In the CAP 2021-2027 budget proposal, market support measures represent 5% of
outlays, and farm income support in the form of decoupled direct payments accounts for 73% of
the budget. Rural development is expected to comprise the remaining 22% (Table 4).
How Is the CAP Administered, Legislated, and Funded?
Administering the Common Agricultural Policy (CAP)
The European Commission administers the CAP through its Directorate General (DG) for Agriculture and Rural
Development.28 The current commissioner is Janusz Wojciechowski (2019-present). The DG for Agriculture and
Rural Development, based in Brussels with a staff of about 1,000, is led by Director-General Wolfgang Burtscher
(April 2020-present). It is responsible for implementing agriculture and rural development policy, the latter
managed in conjunction with the other DGs that deal with structural policies.
Legislating the CAP
Prior to the Lisbon Treaty (2009), the commission proposed changes to the CAP, after a public consultation, and
sent its proposals to the Council of Ministers (meeting in its agricultural ministers formation) for approval. Thus,
EU agricultural policy was somewhat technocratic in nature, as the commission’s economists and agricultural
specialists determined policy design and intent free of most direct political pressures. This changed with the Lisbon
Treaty, which gave the European Parliament a say equal to that of the Council of Ministers over the vast majority
of EU legislation, including agricultural policy. The commission now sends proposed policy changes to both the
Council and the European Parliament. Both the Council and the Parliament must agree to any changes. The
European Parliament first was involved in the agricultural policy reform process in the June 2013 CAP reform.
Funding the CAP
CAP funding is part of the EU’s multiannual financial framework (MFF), which sets a budget framework (inclusive
of budget disciplines and national co-financing requirements) for a seven-year period for al EU supranational
functions.29 The current MFF is for 2021-2027. Two separate funds finance CAP activities:

European Agricultural Guarantee Fund (EAGF), which provides “compulsory expenditures” for
Pil ar I activities; and

European Agricultural Fund for Rural Development (EAFRD), which finances or co-finances
Pil ar II support. Co-financing is at the discretion of individual member states.

Union,” in Agricultural Policy Monitoring and Evaluation 2015 (Paris: OECD Publishing, 2015), pp. 133-147
(hereinafter OECD, Policy Monitor 2015).
27 Under the early CAP programs, domestic purchases of surplus production were referred to as “intervention buying,”
and export subsidies were called “refunds.”
28 For more information, see European Commission, Directorate Gen eral (DG) for Agriculture and Rural Development,
at https://ec.europa.eu/info/departments/agriculture-and-rural-development_en.
29 EPRS, “ Financing the CAP,” by Albert Massot in Fact Sheets on the European Union - 2016, January 2016.
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The CAP Budget: Previous (2014-2020) and Proposed (2021-2027)
The share of the EU budget going to the CAP has been steadily declining since the 1980s. The
CAP represented 66% of the budget for the then-EEC in the early 1980s and 36% of the EU
budget for 2014-2020. In the proposed MFF 2021-2027, the CAP’s share of the EU budget is
expected to decline to 31.3% (Table 4).
Under the proposed 2021-2027 budget, the CAP would be set at €336.4 bil ion in 2018 values (or
approximately $386.6 bil ion), with an expected annual average of about €48.1 bil ion per year
($56.7 bil ion) (Table 4).30 This would represent a decline of 18% from the previous seven-year
CAP budget for 2014-2020 of €411.1 bil ion. The principal reasons for the substantial decline are
the cumulative effect of Brexit (i.e., the departure of the UK from the EU) and the perceived need
to finance other new chal enges facing the EU, such as trade conflicts and climate change.
In the MFF 2021-2027, direct payments are expected to receive the majority (71%) of the
funding, with rural development (23%) and market measures (6%) comprising the balance.
Budget flexibility for member states al ows the possibility of shifting up to 15% of their national
funding between pil ars (and programs) to achieve national goals.31
Table 4. CAP Subceilings in the EU Budget: 2014-2020 vs. 2021-2027
(al data are in 2018 values to facilitate comparison)
EU-28:

EU-27:

EU-27:
2014-2020a
2021-2027
2021-2027

Ann.

Ann.

Ann.
Item
Total
Avg.
Total
Avg.
Total
Avg.
Share

——————€ Bil ion——————

—US$ Bil ion—

Pillar I—Market Support
309.1
44.2
258.6
36.9
305.3
43.6
77%
Direct Payments (BPS, SFP)
291.6
41.7
238.8
34.1
281.9
40.3
71%
Market Measures (CMO)
17.5
2.5
19.8
2.8
23.3
3.3
6%
Pillar II—Rural Development
102.0
14.6
77.8
11.1
91.8
13.1
23%
Total CAP
411.1
58.7
336.4
48.1
386.6
56.7
100%
Total MFF
1,136.1

1,074.3

1,279.4

Source: European Council, “Multiannual financial framework for 2021-2027 adopted,” accessed May 24, 2021, at
https://www.consilium.europa.eu/en/press/press-releases/2020/12/17/multiannual-financial-framework-for-2021-
2027-adopted/; and European Commission, “Common agricultural policy funds,” accessed May 24, 2021, at
https://ec.europa.eu/info/food-farming-fisheries/key-policies/common-agricultural-policy/financing-cap/cap-
funds_en#overview.
Notes: BPS = Basic Payment Scheme; SFP = Single Farm Payment; CMO = common market organization; CAP =
Common Agricultural Policy; MFF = multiannual financial framework. Euros are converted to U.S. dol ars at the
2020 rate of €0.877 per U.S. $; Agricultural Exchange Rate Data Set, Economic Research Service, USDA, April
18, 2021.
a. Data for 2014-2020 are for the EU-28 (inclusive of the United Kingdom).

30 European Council, “Multiannual financial framework for 2021-2027 adopted,” accessed May 24, 2021, at
https://www.consilium.europa.eu/en/press/press-releases/2020/12/17/multiannual-financial-framework-for-2021-2027-
adopted/.
31 Member states whose funding levels average below 90% of the EU average Pillar I payment per hectare may transfer
up to 25% from Pillar II to Pillar I.
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The 2013 CAP reform tightened the link between the two pil ars by expanding direct payments to
have seven potential components—several with rural development aspects (as described in the
Appendix). In addition, payments made under both pil ars are subject to a common set of cross
compliance requirements (discussed below). Furthermore, the CAP sets rules and regulations for
how funds may be used between and within these two pil ars. In addition to the CAP framework,
member states also general y implement supplementary measures funded at the national level that
may target specific local or national objectives.
Pillar I: Market-Related Support and Direct Payments
Pil ar I defines and funds market measures for supported commodities under a single regulatory
structure referred to as the CMO.32 The CMO’s market support tools include what has been the
centerpiece of the CAP since 2003—a largely decoupled direct payment per hectare (background
provided below and in the Appendix), in support of farm incomes. The European Agricultural
Guarantee Fund (EAGF) entirely funds market measures and direct payments—worth €254.3
bil ion (2018 values or U.S. $300.1 bil ion) for 2021-2027, including €17.7 bil ion for market
measures and €237.6 bil ion for direct payments (Table 4).
Market Support Measures
The CMO historical y provided the framework for the various commodity-specific market
support schemes, which took different forms depending on the commodity sector to which they
applied. Prior to 2007, the EU had 21 different commodity CMOs. By 2007, following a series of
reforms, the separate CMOs had been codified into a single CMO covering al agricultural
products.
The CMO has an internal aspect (covering market intervention and rules on marketing and
producer organizations) and an external one (covering trade with third countries—import and
export certificates, import duties, administration of tariff quotas and export refunds, etc.). The
CMO addresses the competition rules applicable to enterprises and the rules on state aid. It
contains general provisions concerning exceptional measures (including measures to guard
against market disruption caused by price fluctuations or other events, market support measures
in the event of outbreaks of animal diseases or a loss of consumer confidence owing to public
health, animal or plant health risks, and measures relating to concerted practices adopted in
periods of serious imbalances on the markets).
Reforms to the CAP have also made the CMO policy progressively more market-oriented and
diminished the role played by intervention tools, which experts regard as safety nets for use only
in the event of a crisis.33 The 2013 CAP reform further enhanced the competitive posture of EU
agriculture by removing al remaining restrictions on production volumes for sugar, dairy, and the
wine sector, thus al owing farmers to respond to world market signals.
In support of internal commodity markets, the 2013 reforms established a new reserve fund for
addressing crises in the agriculture sector—referred to as the Crises Reserve—composed of seven
equal annual tranches of €400 mil ion each (at 2011 prices). The Crises Reserve is available to

32 T he common market organization (CMO) is essentially a set of regulations that (1) provide a safety net to
agricultural producers through the use of market support tools; (2) encourage cooperation through producer and other
organizations that represent activities involving the production of, trade in , and/or processing of agricultural products;
and (3) establish minimum quality requirements (marketing standards), as well as rules on trade in agricultural products
and specific rules on competition.
33 Guillaume Ragonnaud, “First Pillar of the CAP: I—Common Organization of the Markets (CMO) in Agricultural
Products,” in EPRS, Fact Sheets on the European Union - 2016, January 2016.
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finance exceptional measures to address market disruption. Funds for the Crises Reserve are to be
withdrawn from the direct payments budget under Pil ar I. Crisis funds not used in a given year
revert to Pil ar I direct payments for use in the next year.
Direct Payments
Initial y created in 2003 as the Single Farm Payment (SFP), direct payments under Pil ar I of the
CAP were converted to the Basic Payment Scheme (BPS) under the 2013 CAP reform (more
background on BPS is in the Appendix).34 However, some members continued to use the SFP
until 2020 at the latest.35 The CAP reform of 2013 further shifted direct payments from an
emphasis on “decoupling” to noncommodity “targeting” with seven potential targeting
components (see Appendix for details); their use may vary at the discretion of individual member
states.36
Pillar II: Rural Development Programs
The EU’s rural development policy was introduced as the CAP’s Pil ar II as part of the reform
known as “Agenda 2000.” It involves financing or co-funding projects with economic,
environmental, or social objectives, primarily targeting farms and smal and medium-sized
enterprises in rural areas. According to a European perspective, Pil ar II is intended to help
develop an agriculture that achieves an equitable balance across regions, preserves and protects
the environment, avoids damaging the climate, is resilient in a context of climate change, and is
competitive and innovative.37
Member countries design and co-finance activities under Pil ar II. Each member state drafts its
own strategy for implementing rural development based on a “menu” of EU measures to meet the
six priority areas of Pil ar II:38 (1) fostering knowledge transfer and innovation; (2) enhancing
competitiveness of al types of agriculture and the sustainable management of forests; (3)
promoting food chain organization—including processing and marketing—and risk management;
(4) restoring, preserving, and enhancing ecosystems; (5) promoting resource efficiency and the
transition to a low-carbon economy; and (6) promoting social inclusion, poverty reduction, and
economic development in rural areas.
The European Agricultural Fund for Rural Development (EAFRD), supplemented by member
states, funds the EU’s rural development policy. Under the MFF 2014-2020, when the EU-28 was
in effect, the EAFRD was valued at €102 bil ion in 2018 values (Table 4). Each EU country
received a financial al ocation for the seven-year period. This leveraged a further €61 bil ion of
public funding from the member states.39

34 European Commission, DG for Agriculture and Rural Development, “Direct Payments,” January 2015.
35 T he Basic Payment Scheme (BPS) applies in the original EU-15 plus Malta, Slovenia, and Croatia. T he Single Area
Payment Scheme (SAPS) applied in the other member states. OECD, Policy Monitor 2015, p. 139.
36 WT O provisions (described later) classify the BPS and SFP payments as nonmarket-distorting, green-box payments
because they are decoupled from producer production decisions. T hus, they do not count against a country’s domestic
spending limit.
37 Guillaume Ragonnaud, “Second Pillar of the CAP: Rural Development Policy,” in EPRS, Fact Sheets on the
European Union - 2016, January 2016.
38 OECD, “Chapter 11: European Union,” in Agricultural Policy Monitoring and Evaluation 2020 (Paris: OECD
Publishing, 2020), pp. 217-256.
39 In 2016, 118 different rural development programs were operating in the then-28 member states, with 20 single
national programs and 8 member states opting to have 2 or more (regional) programs. European Commission, DG for
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Two conditions apply to Pil ar II programs:
1. A minimum of 30% of rural development funding from the EU budget is to be
spent on measures related to the environment and climate change adaptation,
including forestry and investments in physical assets.
2. Another 5% is to be spent on Liaison Entre Actions de Développement de
l’Économie Rurale (LEADER)—that is, relying on a multisectoral approach and
local partnerships to address specific local problems, as wel as technical
assistance for the implementation of Pil ar II measures.
Conditionality (Cross Compliance)
To receive direct payments and most rural development payments, farmers must comply with
certain environmental and agricultural measures. Referred to as “conditionality” (i.e., cross
compliance), this obligation currently covers two elements:40
1. Statutory Management Requirements. These requirements refer to 13
legislative standards in the field of the environment, food safety, animal and plant
health, and animal welfare.
2. Good Agricultural and Environmental Conditions. The obligation of keeping
land in good agricultural and environmental condition refers to a range of
standards related to soil protection, soil organic matter and structure
maintenance, avoidance of flora and fauna habitat deterioration, and water
management, including ground and surface water protection from pollution of
nitrates and pesticides.
The commission may reduce a farmer’s direct payments if these rules are violated. Under the
commission’s 2018 CAP reform proposal, conditionality would play a much larger role in linking
CAP benefits to various “green” performance standards as discussed in the next section.
The European Commission’s 2018 CAP Reform
Proposal
The commission’s 2018 proposal for CAP reform aims to foster a sustainable and competitive
agricultural sector that can also contribute significantly to the subsequently proposed European
Green Deal (described below), especial y with regard to the Farm to Fork (F2F) Strategy
and Biodiversity Strategy. In particular, the proposal focuses on three policy goals: (1) securing a
fair deal and a stable economic future for farmers; (2) setting higher ambitions for environmental
and climate action than under the previous CAP; and (3) safeguarding agriculture’s position at the
heart of European society.41
To try to achieve these three broad policy goals, the commission has set out nine specific
objectives: ensure a fair income for farmers; increase competitiveness; rebalance the power in the

Agriculture and Rural Development, “Rural Development,” at http://ec.europa.eu/agriculture/rural-development-2014-
2020/index_en.htm.
40 European Commission, DG for Agriculture and Rural Development, “Cross-compliance,” at http://ec.europa.eu/
agriculture/direct-support/cross-compliance/index_en.htm.
41 European Commission, “ Future of the common agricultural policy,” accessed April 27, 2021, at https://ec.europa.eu/
info/food-farming-fisheries/key-policies/common-agricultural-policy/future-cap_en.
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food chain; climate change action; environmental care; preserve landscapes and biodiversity;
support generational renewal of the farm population; foster vibrant rural areas; and protect food
and individual health quality.42
In a departure from the previous CAP, and to help simplify the implementation of an increasingly
complex CAP regulatory framework, the commission proposes a new delivery model that would
emphasize outcomes and performance rather than regulatory compliance. Member states would
be given additional flexibility (from current CAP implementation rules) in how to use their CAP
funding, and they would be al owed to design specific CAP interventions that best fit their
particular agricultural setting and natural resource endowment.
Two elements of the commission reform proposal (that already have been accepted by the
European Parliament and the Council of the EU) include a “no backsliding” principle and a legal
link between CAP and environmental and climate legislation.43 Another proposed change includes
a significant cut (of approximately 18%) in CAP funding over the period—with cuts coming from
both Pil ars I (-16%) and II (-24%).
The “Greening” of the EU’s CAP
The reform proposal represents a limited modification of the current CAP, as it would retain both
Pil ar I (market support) and Pil ar II (rural development), thus implying substantial policy
continuity. The commission proposes to maintain the framework of farm income support
delivered through decoupled direct payments. The reform also proposes to increase the linkages
between CAP benefits and several EU environmental and climate policies proposed as part of the
European Green Deal44 (including the F2F Strategy45 and the Biodiversity Strategy, both
described in the text box, below).46
Major EU Environmental and Climate Initiatives
European Green Deal. Launched in December 2019 by the European Commission, the wide-ranging European
Green Deal contains legislative proposals and other initiatives to address climate and environmental chal enges;
boost the efficient use of resources by moving to a clean, circular economy; and restore biodiversity and cut
pol ution while seeking to ensure economic growth and innovation.47 A key element of the Green Deal is a new
European Climate Law—that is, to enact into EU law the goal of “reaching climate neutrality by 2050 and the
intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.” 48
The European Green Deal also seeks to ensure a “just and inclusive transition” and outlines investments needed,
financing tools, and other supportive interventions and cal s for several new strategies, including on sustainable
food and biodiversity.

42 Ibid.
43 European Commission, “Questions and Answers on the CAP Reform,” November 17, 2020, at https://ec.europa.eu/
info/sites/default/files/food-farming-fisheries/key_policies/documents/questions-and-answers-on-cap-reform_en.pdf.
44 See CRS In Focus IF11431, EU Climate Action and Implications for the United States; and European Commission,
“Analysis of links between CAP Reform and Green Deal,” Staff Working Document SWD 93, May 20, 2020.
45 See CRS In Focus IF11704, U.S. Trade Concerns Regarding the EU’s Farm to Fork Strategy; and European
Commission, “A Farm to Fork Strategy for a fair, healthy and environmentally -friendly food system,” Communication
COM 381, May 20, 2020.
46 European Commission, “ EU 2030 Biodiversity Strategy,” fact sheet, May 2020.
47 European Commission, The European Green Deal, Communication COM 640, December 11, 2019.
48 European Commission, Establishing the Framework for Achieving Climate Neutrality, Regulation Proposal COM
80, March 4, 2020; and European Commission, “ Commission welcomes provisional agreement on the European
Climate Law,” press release, April 21, 2021.
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Farm to Fork (F2F) Strategy. The F2F Strategy is a component of the European Green Deal that cal s for
transitioning to a sustainable, climate-neutral framework via four areas of improvement: (1) sustainable food
production, (2) sustainable food consumption, (3) sustainable food processing and distribut ion, and (4) food loss
and waste prevention. Concerning a sustainable food system, the term sustainable encompasses fairness in pricing
and revenue sharing from producer to consumer; healthy and safe food products; and an environmental y friendly
production and delivery system.49 Such a sustainable food system would minimize or mitigate externalities such as
its impact on pol ution, loss of biodiversity, climate change, food waste, and unhealthy diets. Some of the more
salient F2F strategies to achieve sustainable food production include taking action to

reduce the overal use and risk of chemical pesticides by 50% by 2030;

reduce nutrient loss (especial y from excess use of nitrogen and phosphorous) by at least 50% by 2030, while
ensuring that there is no deterioration in soil fertility;

as a result of nutrient loss reduction, reduce the use of fertilizers by 20% by 2030;

reduce overal EU sales of antimicrobials for farmed animals and in aquaculture by 50% by 2030; and

increase the share of agricultural land under organic farming to at least 25% by 2030.
Other F2F strategies include (but are not limited to) EU-wide labeling for sustainable food, enhanced animal
welfare measures, revised feed additives to reduce the environmental impact of animal husbandry activities,
incentivized carbon farming activities, and enhanced competition rules to improve transparency and limit market
power.
Biodiversity Strategy. This is an EU initiative to expand the protection and restoration of nature by improving
and widening a network of protected areas and by developing an ambitious EU Nature Restoration Plan.50 The
strategy proposes

establishing protected areas for at least 30% each of European land and sea resources;

restoring degraded ecosystems at land and sea across the whole of Europe through a series of specific
initiatives, including reducing the use and risk of pesticides by 50% by 2030; planting 3 bil ion trees by 2030;
restoring at least 25,000 kilometers of EU rivers to a free-flowing state; halting and reversing the decline of
pol inators; and increasing organic farming and biodiversity rich landscape features on agricultural land ; and

funding €20 bil ion per year for biodiversity through various sources, including EU funds and national and
private funding. In addition, natural capital and biodiversity considerations would be integrated into business
practices.
In addition to the green coupling of CAP benefits, the commission proposes a greater emphasis
on research and innovation policy, with results from research investments being delivered to
member states through a system of Farm Advisory Services that provide extension, technological,
and scientific information to farmers.
Under the commission’s proposed CAP reform, four “green architecture” pathways would be
available for participation by member states: (1) mandatory conditionality regulations (described
below); (2) voluntary agrienvironment-climate measures and investments (funded from Pil ar II);
(3) Pil ar I funding for eco-schemes, such as carbon farming or agroforestry (funded from per-
hectare top-up payments to farmers from the member state’s direct payment fund), in lieu of the
greening payments created under the 2013 CAP reform (see Appendix); and (4) the extension
efforts of Farm Advisory Services to deliver the fruit of investments in relevant environmental
and climate-related research and technologies.

49 T ijmen T uinsma, Farm to Fork Strategy, European Parliament, DG for Internal Policies, Policy Department for
Economic, Scientific and Quality of Life Policies, PE 658.206, November 2020.
50 European Commission, EU Biodiversity strategy for 2030, Communication COM (2020) 380, May 20, 2020.
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Conditionality Couples CAP to Farm to Fork Strategy
One component of the European Commission’s CAP reform proposal is what the commission is
cal ing “enhanced conditionality.” Conditionality refers to the basic requirements that producers
must meet to receive CAP benefits, such as the direct payments described earlier. This concept is
similar to “cross compliance” requirements that U.S. producers must meet to maintain eligibility
for certain U.S. program benefits.51 In particular, the commission proposes to link CAP
conditionality to interventions that mitigate climate change, preserve biodiversity, protect
wetlands and peatlands, or support animal welfare and food safety.
To evaluate whether conditionality has been met, the commission proposes that a comprehensive
monitoring framework be developed that includes al relevant performance indicators and that
reports on a yearly basis. While details have yet to be finalized, the commission proposes tracking
CAP spending according to a system of awards whereby different categories of spending are
weighted according to their relevance to climate change (from 0% to 100%). Under such a
weighted system of conditionality, al beneficiaries of CAP area- and animal-related direct
payments would have to abide by a range of obligations related to climate change (such as
maintaining permanent grasslands and protecting wetlands and peatlands—al of which are
potential y important sinks and storage of carbon).
In addition, member states may adopt eco-schemes (with 100% weights), such as carbon farming
or agroforestry, to meet their conditionality requirements. Areas with natural constraints to
farming (such as steep slopes or poor agronomic properties) would be deemed to not fully qualify
as climate change targets and would receive only a 40% weight.52
Another issue that the commission proposes addressing in its CAP reform is the inequality of the
distribution of direct payments. Under the CAP 2014-2020, an estimated 20% of EU farmers
received 80% of payments.53 This inequality is a result of direct payments being linked to
historical land or livestock ownership. This type of linkage is referred to as “entitlement
support.”54 The commission proposes to reduce direct support to €60,000 per farm and full
capping of al support at €100,000 per farm per year. The commission also is proposing a
mandatory redistributive payment to increase support for smal and medium-sized farms by
al ocating higher levels of income support to those farms.
To help meet these goals, a substantial share of CAP funding at the member-state level must be
climate related—a minimum of 40% of each member state’s overal CAP budget and a minimum
of 30% of Pil ar II funding.
The CAP Reform Proposal Is a Work in Progress
The CAP reform proposals—as wel as their details on implementation, measurement, and
enforcement—have yet to be finalized, and the potential for effectively achieving the
environmental and climate goals has yet to be demonstrated. In addition to uncertainty over their

51 For details on cross compliance, see European Commission, “Questions and Answers on the CAP Reform,”
November 17, 2020.
52 Additional “greening” interventions that can be linked to CAP interventions are described in the documentation for
the European Green Deal, the Farm to Fork Strategy, and the Biodiversity Strategy, as provided in earlier footnotes.
53 European Commission, “Questions and Answers on the CAP Reform,” November 17, 2020.
54 A similar situation exists in U.S. agricultural support with respect to decoupled payments made on historical base
acres under the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) revenue support programs. See
CRS Report R45730, Farm Com m odity Provisions in the 2018 Farm Bill (P.L. 115-334).
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potential effectiveness, there is considerable uncertainty over the potential for the stringent
environmental and climate-related requirements to spil over into international markets.
As part of its climate action initiatives, the EU is working on a future carbon border adjustment
mechanism—such as a border tax—to reduce risks to competitiveness and avoid risks of emission
shifts to countries with less ambitious climate policies.55 In March 2021, John Kerry—President
Joe Biden’s envoy on climate—warned the EU that a carbon border tax adjustment should be a
“last resort.” 56 Others have expressed concern that the EU’s F2F Strategy could become
“problematic” for transatlantic trade and any future U.S.-EU trade talks, particularly with regard
to international trade standards.57
An Overview of Current U.S. Agricultural Policy
The 2018 farm bil (the Agricultural Act of 2018, P.L. 115-334) authorizes most of current U.S.
farm policy.58 The farm bil is an omnibus, multiyear (2019-2023) piece of authorizing legislation
that governs agricultural and food programs, including traditional commodity programs as wel as
conservation, trade, rural development, nutrition, and other program areas.59 The 2018 farm bil
authorizes traditional farm programs, such as farm revenue support, as wel as conservation,
nutrition, rural development, and other miscel aneous programs.60
The U.S. farm commodity safety net comprises three traditional components.
1. Traditional Farm Commodity Programs. These programs represent the heart
of U.S. farm policy by virtue of their long history (dating back to the 1930s).61
The marketing assistance loan program establishes minimum prices for
approximately two dozen commodities, including corn, soybeans, wheat, rice,
and peanuts. In addition, producers with production histories for covered crops
could choose between two revenue support programs—the Price Loss Coverage
(PLC) and Agriculture Risk Coverage (ARC) programs.
2. Agricultural Disaster Assistance. Such assistance is permanently authorized for
livestock and orchards.62
3. Federal Crop Insurance Program (FCIP). Authorized outside of the farm bil ,
FCIP available subsidized insurance for more than 130 commodities to help
farmers manage risks associated with a loss in yield or revenue.63 Producers pay
a portion of the premium, which increases as the level of coverage rises. USDA

55 See CRS In Focus IF11431, EU Climate Action and Implications for the United States.
56 Leslie Hook, “ John Kerry warns EU against carbon border tax,” Financial Times, March 12, 2021.
57 See CRS In Focus IF11704, U.S. Trade Concerns Regarding the EU’s Farm to Fork Strategy.
58 Federal crop insurance is permanently authorized under the Agricultural Adjustment Act of 1938 (P.L. 75-430) and
the Federal Crop Insurance Act of 1980 (P.L. 96-365), as amended. Supplementary agricultural disaster assistance
programs are permanently authorized by the 2014 farm bill (P.L. 113-79).
59 For details, see CRS In Focus IF11126, 2018 Farm Bill Primer: What Is the Farm Bill?; and CRS Report R45525,
The 2018 Farm Bill (P.L. 115-334): Summary and Side-by-Side Com parison.
60 For details, see CRS Report R45425, Budget Issues That Shaped the 2018 Farm Bill.
61 See CRS Report R45730, Farm Commodity Provisions in the 2018 Farm Bill (P.L. 115 -334).
62 See CRS Report RS21212, Agricultural Disaster Assistance.
63 See CRS Report R46686, Federal Crop Insurance: A Primer.
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pays the rest of the premium—62%, on average, in 2020—and covers the cost of
sel ing and servicing the policies.
In addition to its three traditional components, ad hoc payments that respond to unexpected
events frequently supplement the U.S. farm safety net. USDA’s use of such ad hoc payments has
grown in recent years to the point where such ad hoc payments now rival traditional safety net
programs in value. For example, during 2017-2019, over $5 bil ion was appropriated for a
Wildfires and Hurricane Indemnity Program (WHIP and WHIP+);64 during 2018 and 2019, in
response to trade disputes, USDA implemented ad hoc payments valued at over $23 bil ion;65 and
in 2020, USDA targeted nearly $40 bil ion in appropriations to agricultural producers in response
to food chain disruptions associated with the COVID-19 pandemic.66
Unlike the EU, where direct payments represent the largest share (73%) of the projected CAP
budget for 2014-2020 (Table 4), domestic nutrition programs comprise the largest share (80%) of
projected U.S. farm bil outlays over the five-year farm bil period 2014-2018 (Table 5).
Table 5. U.S. 2018 Farm Bill Projected Outlays ($ Billions), FY2019-FY2023
Projected outlays
Annual
Program Area
FY2019-FY2023
Average
Share
Farm Safety Net
$71.4
$14.3
17%
Commodity Programs and Disaster Assistance
$33.4
$6.7
7%
Crop Insurance
$38.0
$7.6
9%
Rural Developmenta
$1.6
$0.3
0%
Conservation and Forestry
$29.3
$5.9
9%
Nutritionb
$390.7
$65.2
80%
Total Farm Bill
$428.3
$85.7
100%
Source: CRS Report R45425, Budget Issues That Shaped the 2018 Farm Bil . The Congressional Budget Office
projected outlays at the time of the 2018 farm bil enactment.
a. Includes trade, credit, bioenergy, research, extension, and related matters.
b. Primarily the Supplemental Nutrition Assistance Program (SNAP).
Comparing Farm Support: The EU and United States
This final section compares EU and U.S. agricultural support programs and outlays based on two
international data sources: (1) annual domestic support notifications to the WTO and (2) a set of
comparative policy measures published annual y by OECD as part of its country-level policy
database. Each of these data sources uses a slightly different metric to evaluate and measure
agricultural support but arrives at very similar conclusions.67

64 CRS In Focus IF11539, Wildfires and Hurricanes Indemnity Program (WHIP).
65 CRS In Focus IF11289, Farm Policy: Comparison of 2018 and 2019 MFP Programs.
66 CRS In Focus IF11764, U.S. Agricultural Aid in Response to COVID-19.
67 For a discussion of U.S. farm support outlays in a WT O context, see CRS Report R46577, U.S. Farm Support:
Outlook for Com pliance with WTO Com m itm ents, 2018 to 2020 . For a review of U.S. farm revenue support outlays
during the 2014-2020 period, see CRS Report R46561, U.S. Farm Policy: Revenue Support Program Outlays, 2014 -
2020.
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WTO Notifications of Domestic Agricultural Support
WTO member countries periodical y provide (or “notify”) their outlays of domestic agriculture
support to the WTO as part of each country’s commitments agreed to at the time of the Uruguay
Round Agreement on Agriculture (AoA).68 A primary policy goal of the WTO’s AoA was to
encourage member countries to shift domestic agricultural policy away from programs that are
market and trade distorting and toward non- or less-distorting types of programs (see text box
below for examples). The primary purpose of the notification data is to monitor how a country is
doing in terms of bringing domestic support for its agricultural sector into compliance with the
agreed-upon WTO limits.69
WTO Classification of Domestic Support Programs
The World Trade Organization’s (WTO’s) Agreement on Agriculture (AoA) categorizes and restricts agricultural
domestic support programs according to their potential to distort commercial markets. Whenever a program
payment influences a producer’s behavior, it has the potential to distort markets (i.e., alter the supply and market
price of a commodity) from the equilibrium that would otherwise exist in the absence of the program’s influence.
Those outlays that have the greatest potential to distort agricultural markets are subject to spending limits. In
contrast, outlays that cause less market distortion are exempt from spending limits. The WTO uses a modified
traffic light analogy to group programs.70

Amber box programs, the most market-distorting programs, include payments contingent on participation
in agricultural production. They are cumulatively measured by the aggregate measure of support, which
includes support for al program areas and al commodities, even those supported through indirect price
supports such as tariff-rate import quotas (TRQs). Examples are U.S. price supports for sugar; U.S. marketing
loan, Agriculture Risk Coverage, and Price Loss Coverage benefits for grain and oilseed producers; certain
crop insurance premium subsidies; and EU common market organization program support via TRQs and
intervention purchases of farm products at administratively maintained prices above market prices. Certain
amber box outlays may be excluded under the de minimis exemptions (see below). Non-excluded amber box
outlays are subject to an annual aggregate spending limit.

Blue box programs are described as market-distorting but production-limiting. These programs are
considered less market distorting than amber box programs because of their production limiting aspect.
Payments are based on either a fixed area or yield or a fixed number of livestock and are made on 85% or
less of historical (i.e., base) production. Examples are EU direct payments to producers based on fixed areas
or yields or a fixed number of livestock. There are currently no U.S. blue box programs. Blue box programs
are not subject to WTO disciplines or reductions.

Green box programs are minimal y or nonmarket distorting. Examples are extension and research
programs, environmental program payments, disaster assistance, direct payments to farmers that are not
contingent on production, and domestic food assistance programs. Green box payments are not subject to
WTO disciplines or reductions.

Prohibited (i.e., red box) programs include certain export and import subsidies and nontariff trade
barriers that are not explicitly included in a country’s WTO schedule or identified in the WTO legal texts.
Such programs are deemed il egal under WTO rules and commitments and must be removed immediately.

De minimis (DM) exemptions apply to spending that is sufficiently smal —relative to either the value of a
specific product or total production—to be deemed benign and not likely to distort markets and trade. Two
types of DM exemptions are available: commodity-specific support (i.e., support that applies to a specific

68 See CRS Report RL32916, Agriculture in the WTO: Policy Commitments Made Under the Agreement on
Agriculture.
69 A major limitation of WT O notification data is the substantial lag in reporting from WT O members. Comparable
data on the United States and the EU are available for the 23-year period from 1995 through 2017. During this period,
the EU expanded from 15 to 28 members, making the EU historical data over time representative of changing
membership. T he UK’s departure from the EU under Brexit occurred after t his data period.
70 See CRS Report RS20840, Agriculture in the WTO: Rules and Limits on Domestic Support (nondistributable but
available to congressional clients upon request).
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product such as wheat or sugar); and nonproduct-specific support (e.g., irrigation, grazing subsidies, biomass
and rural energy programs and certain whole-farm crop insurance premium subsidies). DM exemptions are
limited to less than 5% of the value of production (either product-specific or total).71

Overall trade-distorting domestic support (OTDS) captures the ful extent of market-distorting
outlays by aggregating outlays made under the amber box, the two DM exclusions, and the blue box.
Several countries have criticized the considerable exceptions (e.g., blue box and two de minimis exemptions) that
have permitted many major agricultural producing countries—including both the United States and the EU—to
avoid being restricted by their amber box commitments. During the now-defunct Doha Round of WTO trade
negotiations, trade negotiators developed the term OTDS in an attempt to assess the ful extent of each country’s
market-distorting policy intervention.
Trade-Distorting Support Has Declined
The Overal Trade-Distorting Domestic Support (OTDS) measure—designed to assess the full
extent of each country’s market-distorting policy intervention—includes both amber box outlays
and spending excluded under the three exemption categories of blue box, product-specific de
minimis, and nonproduct-specific de minimis.
Both the EU and the United States have significantly decreased their use of trade-distorting
program outlays since the mid-1990s. A comparison of farm program outlays for the periods of
1995-2006 (which roughly represents the pre-policy-reform period) and 2015-2017 (the most
recent years for which comparable WTO notification data are available) show that the EU and the
United States have greatly reduced market-distorting farm support program outlays (Table 6 and
Figure 1).72 Instead, the EU and the United States increasingly rely on more benign green-box-
type programs to support their agricultural sectors.
Based on the notification data, the following trends emerged during the 1995-2006 period:
 The United States averaged $20.4 bil ion annual y in OTDS, including amber
box support (that is, in nonexempt, market-distorting support) of $15 bil ion, with
four commodity groups receiving the majority of support: dairy (47%); grains,
pulses, and oilseeds (30%); sugar (11%); and cotton (11%).
 EU OTDS and amber box support had much larger annual averages of $95.6
bil ion and $62.4 bil ion, respectively. EU commodity payments were more
broadly dispersed than U.S. commodity support—spread across dairy, sugar,
grains and oilseeds, fruits, vegetables, olive oil, and wine. Unlike in the United
States, where fresh and processed fruits and vegetables were largely excluded
from market support, these products (along with olive oil and wine) represented
34% of EU amber box outlays. Other EU product sectors receiving substantial
amber box support were livestock (19%), grain products (16%), sugar (15%), and
dairy (14%).

71 T he United States has relied on use of de minimis exemptions, especially the nonproduct -specific de minimis
exemption, to stay within its WT O spending limit. For more information, see CRS Report R46577, U.S. Farm Support:
Outlook for Com pliance with WTO Com m itm ents, 2018 to 2020 .
72 U.S. and EU domestic support notification data reported in Table 6 and Figure 1, as well as the text for this section,
have been adjusted for inflation to 2020 dollars (see table and chart notes for details).
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Table 6. WTO Notifications of Agricultural Domestic Support: EU vs. United States
(adjusted for inflation to bil ions of 2020 dol ars)
U.S. Average

EU Average
Domestic Agriculture Support
Category
1995-2006
2015-2017

1995-2006
2015-2017
Amber boxa
15.0 (100%) 4.2 (100%)

62.4 (100%)
8.2 (100%)

Dairy
7.0 (47%) 0.0 (0%)

8.8 (14%)
5.4 (66%)

Sugar
1.6 (11%) 1.6 (39%)

9.4 (15%)
0.0 (0%)

Grains, pulses, oilseeds
4.4 (30%) 1.4 (34%)

10.0 (16%)
2.6 (31%)

Cotton
1.7 (11%) 0.9 (22%)

1.0 (2%)
0.0 (0%)

Fruits, vegetables, olive oil, wine
0.2 (2%) 0.2 (6%)

21.2 (34%)
0.2 (3%)

Livestock
0.0 (0%) 0.0 (0%)

12.0 (19%)
0.0 (0%)

Amber de minimis
6.6 13.5

1.8
2.7

Product-specific
0.4 5.5

1.2
1.1

Nonproduct-specific
6.1 8.0

0.6
1.6

Blue box
0.4 0.0

31.4
5.4

OTDS
22.0 (22%)
17.7 (12%)

95.6 (71%)
16.3 (18%)

Green box
80.0 (78%)
127.5 (88%)

39.4 (29%)
73.5 (82%)
General services
11.4
13.4

8.6
7.3
Public stockholding for food security
0.0
0.0

0.0
0.0
Domestic food aid
56.2
108.9

0.5
1.4
Decoupled income support
7.2
0.2

6.1
34.7
Income insurance and safety-net programs
0.0
0.0

0.0
0.2
Payments for relief from natural disasters
1.7
0.2

0.7
0.7
Structural adj.: product retirement programs
0.0
0.0

1.1
0.3
Structural adj.: resource retirement programs
1.4
0.0

0.7
0.1
Structural adj.: investment aids
0.2
0.1

9.0
5.4
Environment payments
1.9
4.8

7.5
9.0
Payments under regional assistance programs
0.0
0.0

4.4
5.2
Other
0.0
0.0

0.8
9.2
OTDS + Green box
102.0 (100%)
145.2 (100%)

134.9 (100%)
89.8 (100%)
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Source: CRS calculations based on EU and U.S. notifications of domestic support for agriculture. See WTO,
“WTO Documents Online,” at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S005.aspx.
Notes: OTDS = Overal Trade-Distorting Domestic Support; adj. = adjustment. Totals may not sum due to
rounding. EU values are converted using euro exchange rates compiled by USDA’s Economic Research Service.
U.S. dol ars are deflated to 2020 dol ars using the GDP Implicit Price Deflator, Bureau of Economic Analysis,
Department of Commerce. Euros are deflated to 2020 dol ars by the Harmonized Indices of Consumer Prices,
Eurostat.
a. These figures represent both taxpayer-paid subsidies in the form of direct payments and consumer-paid
subsidies, such as the U.S. sugar program, which support the domestic price of refined sugar above
international market prices through import quotas.
By 2015-2017, policy changes had lowered market-distorting farm program outlays for both the
EU and the United States:
 U.S. annual average OTDS and amber box support had declined to $11.5 bil ion
(-44%) and $4.3 bil ion (-71%), respectively. Dairy, sugar, and grains and oilseed
programs continued to dominate support, with a drop-off in support to cotton.
 Similarly in the EU, annual average OTDS and amber box support had declined
to $16.3 bil ion (-83%) and $8.2 bil ion (-87%), respectively. Amber box support
had shifted almost entirely to the dairy (66%) and grain and oilseeds (31%)
sectors, while support to fruits, vegetables, olive oil, and wine (3%) had declined
sharply, and support for sugar, cotton, and livestock had fal en to zero (0%).
Green Box Spending Has Expanded
For both the United States and the EU, the bulk of agricultural support is now green box
programs (i.e., minimal y market distorting and not subject to WTO disciplines).
 U.S. green box support has risen from an 80% share of total support (i.e., OTDS
plus green box) during 1995-2006 to a 92% share in 2015-2017. In the United
States, the single largest component of green box outlays is domestic food aid,
which averaged $108.9 bil ion and accounted for 83% of green box spending (in
2020 dollars) during 2015-2017.
 Green box outlays have risen more sharply in the EU, from a 29% share of total
support to an 82% share over the two periods. In the EU, decoupled direct
payments accounted for 47% of green box spending, with environmental
payments (12%), general services (10%), structural adjustment investment aids
(7%), and regional assistance programs (7%) as important recipients.
Rural development outlays may be approximated by combining payments under the green box
categories of “regional assistance programs” and “investment aids.” EU average outlays for rural
development of $13.4 bil ion and $10.6 bil ion for the two time periods are much larger compared
with the U.S. average outlays of $0.2 bil ion and $0.1 bil ion. This does not provide a
comprehensive accounting of rural development outlays, but it does suggest that EU rural
development spending is substantial y larger than its counterpart U.S. outlays.
The United States Exceeds the EU in Combined Overall Trade-Distorting
Domestic Support and Green Box Outlays
Combining OTDS with green box outlays provides a very broad, inclusive definition of support
for the agricultural sector—one that encompasses rural development and consumer nutrition
assistance along with producer support. Using this broad measure, EU annual average spending
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has decreased nearly 33% in real terms (2020 dollars) to $89.8 bil ion in 2015-2017, compared
with $134.9 bil ion in 1995-2006 (Table 6).
U.S. outlays for the combined OTDS-green box measure have grown faster and are larger at $139
bil ion in 2015-2017. As mentioned earlier, domestic food assistance accounts for a large share of
U.S. green box support, 85% compared with a 2% share in the EU. In contrast, the EU provides
more support for both environmental and rural development programs under the green box than
the United States.
The OTDS for the EU and United States has declined since the late 1990s, although the EU’s
decline is much stronger and reflects the EU’s significant drop-off in use of both amber box and
blue box programs (Figure 1).
 In the United States, a 46% increase in the use of de minimis exclusions (rising
from a combined annual average of $5.0 bil ion in 1995-2006 to $7.3 bil ion by
2015-2017) partial y offsets the decline in amber box spending. For the United
States, the OTDS peaked at $36.1 bil ion in 1999 (in 2020 dollars) but has
declined since then and averaged $11.5 bil ion in 2015-2017.
 In contrast, because of its policy reforms, the EU’s OTDS has declined from a
peak of $143.0 bil ion (2020 dollars) in 1995 to an annual average of $16.3
bil ion in 2015-2017. In addition to the decreased use of amber box programs, the
EU decreased its use of the blue box exemption by 83%, from an annual average
of $31.4 bil ion in 1995-2006 to $5.4 bil ion in 2015-2017.
Recent Policy Changes and WTO Notification Prospects
Policy changes instituted or proposed since 2018—that is, under the European Commission’s
2018 proposed CAP reform and the 2018 U.S. farm bil —are not expected to significantly change
spending levels and associated WTO notifications for either entity.73 However, large-scale ad hoc
payments made by the United States during 2018 and 2019 in response to trade disputes, and in
2020 in response to food chain disruptions associated with the COVID-19 pandemic, could result
in substantial increases in U.S. domestic support notifications—particularly market-distorting-
type outlays—to the WTO starting in 2018.74 In contrast, the commission’s proposed CAP
reforms for 2021-2027 would appear likely to increase the green box’s share of CAP outlays at
the expense of OTDS outlays.

73 T he UK’s departure will reduce EU-27 CAP outlays; otherwise, the expected decline in outlays for the 2021 -2027
period is expected to be relatively small at 2.8%, as discussed earlier in this report.
74 T he United States has already notified its domestic support outlays for 2018 (G/AG/N/USA/15 0; April 8, 2021), and
the large ad hoc payments in that year pushed amber box and OT DS outlays substantially higher, to $13.5 billion and
$26.7 billion, respectively. For details on how the ad hoc programs of 2018 through 2020 might affect U.S. notificati on
of domestic support outlays to the WT O, see CRS Report R46577, U.S. Farm Support: Outlook for Com pliance with
WTO Com m itm ents, 2018 to 2020.
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EU Agricultural Domestic Support: Overview and Comparison with the United States

Figure 1. OTDS and Green Box Comparisons

Source: CRS calculations based on annual WTO notifications of domestic support for agriculture. WTO,
“WTO Documents Online,” at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S005.aspx.
Notes: OTDS = Overal Trade-Distorting Domestic Support; includes al market-distorting support outlays—
amber box, blue box, and de minimis exemptions. Green box support is minimal y or nonmarket-distorting.
Three chart categories include (A) as a % of total production value, (B) nominal dol ars as notified to the WTO
for each individual year, and (C) deflated to 2020 dol ars. U.S. dol ars are deflated using the Consumer Price
Index, Bureau of Labor Statistics. Euros are converted to dol ars using exchange rates compiled by USDA’s ERS
then deflated by the Harmonized Indices of Consumer Prices, Eurostat, 1995-2020.
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Organisation for Economic Co-operation Development Estimates of
Agricultural Support
An inherent weakness in WTO member notification data is that each country may identify and
categorize its various support program outlays according to its own interpretation (rightly or
wrongly) of the WTO criteria on domestic support.75 An alternate source of data for evaluating
farm program support among major developed economies is the OECD’s policy database.76
OECD data describe and evaluate agricultural policies in each of the OECD countries and are
compiled by an independent team of policy analysts using a common set of policy measures that
include both direct and implicit types of support.77
OECD’s Agricultural Policy Measures
Organisation for Economic Co-operation and Development (OECD) analysts have developed a methodology to
evaluate and classify the various types of agricultural support programs of major developed countries in a
consistent fashion across countries and over time.78 OECD classifies public transfers to producers and consumers
of agricultural products into three separate categories—producer, general services, and consumer support—
which cumulatively produce the total support estimate.
While the data are initial y available as values (expressed in units of each country’s domestic currency), OECD also
expresses the support measures as a percentage of the value of gross farm output to avoid the issues associated
with exchange rate fluctuations when making comparisons of agricultural support across countries.
(1) Producer Support Estimate (PSE)
The PSE reflects the annual monetary value of al policy measures (explicit and implicit), measured at farm gate,
that support agricultural producers. The PSE includes

production-based support, such as commodity price supports, payments related to input use (including, for
example, crop insurance premiums), and payments based on various current production measures, including
area planted, animal numbers, receipts, and income; and

payments where no production is required, such as those based on historical criteria or on other
noncommodity criteria, such as long-term resource retirement; thus, the PSE measure includes decoupled
direct payments and most conservation payments that support enhancements to farmland.
(2) General Services Support Estimate (GSSE)
The GSSE measures the annual monetary value of support, measured at the farm gate, that benefits the agricultural
sector in general but does not include payments to individual producers. For example, the GSSE includes payments
made for extension, research and development, infrastructure, marketing and promotion of agricultural products,
public stockholding, training, and inspection services. GSSE outlays are similar to the WTO’s green box category
of spending but without domestic food assistance, which is included with consumer support.
(3) Consumer Support Estimate (CSE)

75 Such notifications are allowed unless successfully challenged by another country under the WT O dispute settlement
process.
76 OECD is an intergovernmental economic organization with 37 member countries, founded in 1961, to stimulate
economic progress and world trade. OECD collaborates with governments and policymakers to evaluate policy
solutions to a range of social, economic, and environmental challenges and to establish evidence-based international
standards.
77 A further advantage of OECD’s policy data is that such data extends from 1986 to 2019, allowing for a longer
historical perspective than is available from WT O notification data (1995-2017). T he OECD agricultural policy data set
includes data from 15 OECD-member economies: Australia, Canada, Chile, Colombia, EU, Iceland, Israel, Japan,
South Korea, Mexico, New Zealand, Norway, Switzerland, T urkey, and the United States; as well as 12 non -OECD
member economies: Argentina, Brazil, China, Costa Rica, India, Indonesia, Kazakhstan, Philippines, Russia, So uth
Africa, Ukraine, and Vietnam. OECD, OECD Data, “ Agricultural Support ,” at https://data.oecd.org/agrpolicy/
agricultural-support.htm.
78 For example, see OECD, Agricultural Policy Monitoring and Evaluation 2020 (Paris: OECD Publishing, 2020), at
https://doi.org/10.1787/928181a8-en.
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The CSE measures the annual monetary value of support, measured at the farm gate, to consumers of agricultural
products. On the positive side, the CSE includes domestic food assistance (e.g., the Supplemental Nutrition
Assistance Program or SNAP) and nutrition programs that facilitate access to food for lower-income households.
If negative, the CSE measures the burden (implicit tax) on consumers through high internal producer-support
prices or import barriers that tend to raise consumer food prices and that may more than offset any consumer
subsidies.
Total Support Estimate (TSE)
The TSE measures the annual monetary value of al gross transfers from taxpayers and consumers arising from
policy measures that support agriculture, net of the associated budgetary receipts, regardless of their objectives
and impacts on farm production and income or consumption of farm products.
Producer Support Estimate Percentage Declining for the United States and EU
The principal OECD measure of potential y market-distorting agricultural support to producers is
the PSE—described in the box, above. Reforms to U.S. and EU agricultural policy since the
1986-1988 period—which were precipitated in part by internal budget pressures and the
widespread acceptance of the rules and standards for domestic support detailed in the WTO’s
AoA79—have considerably reduced the level of producer support in both regions.
With respect to U.S. and EU agricultural support, general conclusions based on OECD PSE data
include the following (Figure 2, top chart):
 The PSE value, expressed as a percent of the gross farm receipts, has trended
lower for both the United States and the EU from the late 1980s.
 During 1986-1988, the EU’s PSE averaged 38.5% of gross farm receipts. By
2014, it had declined to 17.4% but has since tracked in the 18%-19% range.
 During 1986-1988, the U.S. PSE averaged 20.6% of gross farm receipts. It
peaked at 23.3% in 1999 when low market prices pushed countercyclical
program payments up; these were supplemented by large ad hoc emergency
assistance payments. Since 1999, the U.S. PSE share steadily declined to a low of
6.7% in 2013 before rising gradual y to 12.1% in 2019.
 From 2015 to 2019, the PSE for the EU averaged 19.2%, nearly double the
average PSE for the United States of 10.0%. Thus, despite the substantial decline
in PSE support levels, the EU stil supports agriculture at about double the rate of
the United States when measured as a share of gross farm receipts.
General Services Support Estimates Percentages Have Been Small and Stable
General services support estimates (GSSE) include outlays for extension, research and
development, infrastructure, marketing and promotion of agricultural products, public
stockholding, training, and inspection services. From 1986 to 2018, GSSE outlays remained smal
relative to the respective farm economies for the EU and United States, staying largely within a
narrow band of 2% to 5% when expressed as a share of gross farm receipts (Figure 2, middle
chart).
 Since 2010, the EU’s GSSE share has averaged 3.1% of gross farm receipts,
compared with a 2.4% average share for the United States.

79 See CRS Report RS20840, Agriculture in the WTO: Rules and Limits on Domestic Support (nondistributable but
available to congressional clients upon request).
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EU Agricultural Domestic Support: Overview and Comparison with the United States

Figure 2. OECD Subsidy Equivalents: EU vs. United States
(subsidy equivalents expressed as a % of gross farm receipts)

Source: OECD, OECD Data, “Agricultural Support,” at https://data.oecd.org/agrpolicy/agricultural-support.htm.
Notes: The PSE includes the annual monetary value of al support, direct and implicit, to agricultural producers.
The GSSE measures support that benefits the agricultural sector in general but does not include payments to
individual producers. The CSE measures support to consumers of agricultural products. If negative, the CSE
measures the burden (implicit tax) on consumers. Al values are at the farm gate.
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The EU Taxes and the United States Supports Consumers of Agricultural
Products
The Consumer Subsidy Equivalent (CSE) measures the annual monetary value of support,
measured at the farm gate, to consumers of agricultural products. The CSE has been expressed as
a share of gross farm receipts to facilitate comparison (Figure 2, bottom chart). If positive, the
CSE includes domestic food assistance and nutrition programs that facilitate access to food for
lower-income households. If negative, the CSE measures the burden (implicit tax) on consumers
through high, internal producer-support prices or import barriers that tend to raise consumer food
prices and that may more than offset any consumer subsidies.
Since the mid-1990s, U.S. consumers have benefited from government agricultural supports that
have contributed, on net, to lower consumer prices and widespread access to domestic production
and imports. Such policies include those that have incentivized greater food production, lowered
trade barriers, and targeted certain population subgroups for greater access to food through
nutrition programs.
 Since 2000, the U.S. CSE has been positive. It trended steadily higher to an
11.5% share of gross farm receipts in 2013, before slowly declining to a 7.1%
share in 2019.
 In contrast, the EU’s CSE has measured negative over the entire 1986-2019
period. Thus, EU consumers have, on net, helped to underwrite subsidy transfers
to their agricultural sector.
 Although negative, the EU’s CSE has trended upward (or been less negative),
from a low of -32.5% when expressed as a share of gross farm receipts in 1987 to
a high of -2.3% in 2011.
 Since 2015, the U.S. CSE has averaged 8.9% of gross farm receipts, compared
with an average share of -3.8% for the EU.
EU Reforms Have Fostered Near Parity Betw een Internal and Border Prices
OECD calculates a “nominal protection coefficient” that provides an indication of the degree to
which a country is open to international market conditions (Figure 3). The coefficient is a ratio of
the domestic support price to the international price at the border—the closer the ratio is to 1.0,
the more open the country’s markets.
The United States maintains relatively open borders for trade, with the exception of two major
commodities that are protected by tariff-rate import quotas (TRQs): sugar and dairy products.
Since the late 1980s, the EU has progressively reduced domestic market price-triggered support
and protection at the borders and increased decoupled direct payments to farmers, thus al owing
producers to better respond to global market signals.
 In 1987, EU farm prices exceeded world market prices by 75%—that is, a
nominal protection coefficient of 1.75. However, the EU’s high level of internal
support has declined substantial y since then.
 The EU’s market access for agricultural products has general y improved since
the 1980s through bilateral agreements and lower applied tariffs. The end of the
EU’s milk production quota in 2015 and the sugar quota in 2017 were important
steps in this direction.
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EU Agricultural Domestic Support: Overview and Comparison with the United States

 Since 2016, domestic prices for most EU commodities have been closely aligned
with border prices, and the nominal protection coefficient for both the EU and the
United States has averaged 1.04.
Figure 3. The Producer’s Nominal Protection Coefficient: EU vs. United States

Source: OECD, OECD Data, “Agricultural Support,” at https://data.oecd.org/agrpolicy/agricultural-support.htm.
Notes: The nominal protection coefficient shows how much protection domestic support prices provide above
world prices. A ratio of 1.0 implies equity, whereas a ratio greater than 1.0 signifies protection.
Conclusion
The EU is one of the United States’ chief agricultural trading partners and a major competitor in
world food markets. Both the EU and the United States heavily support their agricultural sectors.
At the same time, strong budgetary pressures coupled with a shifting policy preference toward
greater market orientation have motivated the United States and the EU to modify their farm
programs since the 1980s. Traditional price and income support programs that had the potential to
distort commodity markets have been progressively replaced by support that is decoupled from
production or prices.
Many in Congress have historical y defended U.S. farm support programs as a means to ensure
that the United States has continued access to the “world’s safest, highest quality, and most
abundant food supply.”80 European defenders of the CAP have made similar arguments for state-
sanctioned intervention in the agricultural sector. For others, longstanding criticisms and
continued debate have chal enged the extent of and need for government support of farm
programs. Some argue that decisions by the United States and the EU not to enact substantial
reform to their respective farm support programs during the 1990s and early 2000s contributed to
delays in the now defunct WTO Doha Round of multilateral trade negotiations.81

80 For example, Rep. Mike Conway, Chairman of the House Agriculture Committee, “ The livelihood and lifeblood of
rural America,” Bloom berg, June 6, 2016, at http://about.bgov.com/blog/the-livelihood-and-lifeblood-of-rural-america/.
81 CRS Report RS22927, WTO Doha Round: Implications for U.S. Agriculture.
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Now, in the face of looming environmental and climate concerns, many policymakers are looking
for ways to reorient farm policy to address multiple chal enges simultaneously, while ensuring
that natural resources are used wisely and complying with international trade commitments. The
United States and the EU figure dominantly in the development and use of agricultural policy on
the global level. Information about new policy approaches and comparisons of EU and U.S. farm
support programs may continue to be of interest to Congress as the United States prepares for
another round of domestic farm bil negotiations and continues to engage in international trade
negotiations on several fronts.
Summary of Policy Comparisons
Since the mid-1990s, as a general trend, total farm sector support (excluding domestic food aid)
has declined substantial y in both the United States and the EU (as described below and shown in
Table 6 and in Figure 1, Figure 2, and Figure 3). When domestic food aid is included, overal
U.S. agricultural support has increased substantial y relative to both the 1995-2006 period and to
the EU.
Several observations that emerge from a comparison of farm support based on available data from
the WTO and OECD include the following:
 Historical y, the United States has used less OTDS than the EU. However, in
recent years the EU has made substantial reductions in the volume of its trade-
distorting support, bringing it at parity with the United States since 2010 (Figure
1, charts A, B, and C on the left-hand side).
 In the EU and the United States, support for less-distorting noncommodity-type
programs (i.e., green box)—for example, conservation, rural development,
agroforestry, nutrition, and bioenergy—has increased substantial y and now
accounts for a majority share of total farm support (Table 6).
 Since 2012, the United States has spent substantial y more than the EU on green
box programs (i.e., less-distorting noncommodity-type programs). When
expressed as a share of total production value, U.S. green box outlays are nearly
double those of the EU (32% versus 17%); however, when domestic food aid is
excluded, then the U.S. share is about one-third that of the EU (5% versus 17%)
(Figure 1, chart A on right-hand side).
 When measured in terms of PSE and reported as a share of total gross farm
receipts, support for market-distorting commodity programs has decreased for the
EU and the United States, but the EU’s share remains substantial y higher than
the U.S. share, at 19% versus 12% (Figure 2, top chart).
 With respect to general services support outlays (such as extension, research, and
infrastructure), the EU and the United States provide similar levels of support
when expressed as a share of total gross farm receipts (Figure 2, middle chart).
 U.S. consumers have received net benefits from agriculture-based support
programs (especial y from domestic food aid programs such as the Supplemental
Nutrition Assistance Program or SNAP). In contrast, EU consumers have
general y transferred more support to agricultural producers than has been
received in offsetting benefits (i.e., the EU’s consumer subsidy estimate is
negative), although the net transfer has been declining over time as a share of
gross farm receipts (Figure 2, bottom chart).
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 The decline in the EU’s use of trade-distorting policy support measures is seen
by a decline since the mid-1980s in the difference between internal EU support
prices and the international market price—referred to as “nominal border
protection” (Figure 3).
 Large-scale ad hoc payments made by the United States during 2018 and 2019 in
response to trade disputes, and in 2020 in response to food chain disruptions
associated with the COVID-19 pandemic, could result in substantial increases in
U.S. domestic support notifications—particularly market-distorting-type
outlays—to the WTO starting in 2018. In contrast, the commission’s proposed
CAP reforms for 2021-2027 could increase the green box’s share of CAP outlays
at the expense of OTDS outlays.
Policy Implications
The European Commission’s proposed CAP reforms appear to make substantial adjustments to
the EU’s agricultural policy framework to address growing environmental and climate concerns
with policy benefits linked strongly to specific environmental and climate targets. Details on
implementation, measurement, and enforcement have yet to be finalized, and the potential for
effectively achieving the environmental and climate goals have yet to be demonstrated. If
successful, the EU’s CAP reforms could provide a comparison for other countries seeking to
make progress in a similar direction. On the other hand, concerns are emerging about the
potential for EU environmental and climate requirements to spil over into international markets
and potential y affect U.S. agricultural exports to the EU and elsewhere. Thus, Congress may be
interested in closely monitoring the successes and failures of the EU—as wel as the potential for
unintended consequences—as it continues to engage in international trade negotiations and
prepares for another round of domestic farm bil negotiations when the current farm bil expires
in 2023.
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Appendix. The Common Agricultural Policy Basic
Payment Scheme
The 2018 Common Agricultural Policy (CAP) reform proposed by the European Commission
would retain many of the specific program features of the previous CAP. During the transition
period (2021 and 2022, as described in “CAP Reform Beyond 2020”), most of these CAP features
remain in effect.
The 2013 CAP reform created the Basic Payment Scheme (BPS) to replace the Single Area
Payment Scheme (SAPS). The BPS has expanded targeting of payments that can occur under
seven potential components (Figure A-1 and Table A-1)—whose use may vary at the discretion
of individual member states.82 These seven components are listed below.
1. BPS. The BPS is the primary component of the CAP’s Pil ar I. It involves a basic
payment per hectare, the level of which is to be harmonized according to an
external payment convergence to reduce disparities in the level of direct
payments between member states83 (and set a minimum national average direct
payment per hectare across al members by 2020) and an internal payment
convergence requirement to reduce disparities within countries and regions.84 The
BPS is also subject to degressivity—a mandatory minimum 5% reduction applied
to total BPS support above €150,000 per recipient.85
2. Green Payment. The green payment provides additional support to offset the
cost of providing environmental public goods not remunerated by the market.
The CAP requires that 30% of Pil ar I funds be used for per-hectare payments
conditional on three farming practices (referred to as “greening”): (i) a minimum
of 5% of a farm’s land is converted to an Ecological Focus Areas;86 (i )
maintenance of permanent grasslands;87 and (i i) crop diversification on arable
land with multi-crop requirements increasing with farm size.88
3. Young Farmer Scheme. This scheme encourages generational renewal by
supplementing the basic payment with an additional payment (using up to 2% of

82 European Commission, DG for Agriculture and Rural Development, “CAP Explained Direct Payments For Farmers
2015-2020,” May 2017, at https://op.europa.eu/en/publication-detail/-/publication/541f0184-759e-11e7-b2f2-
01aa75ed71a1; see also “ Income Support,” at https://ec.europa.eu/info/food-farming-fisheries/key-policies/common-
agricultural-policy/income-support .
83 Countries receiving less than 90% of the EU average basic payment are to gradually receive more from 2015
onwards, and those receiving more than the EU average are to see a gradual cut in payments. By 2020, a minimum
average basic payment of €196 per hectare should be reached by all member states.
84 For details, see European Commission, Direct Payments: the Basic Payment Scheme from 2015: Convergence of the
value of payment entitlements (‘Internal Convergence’), December 2015, at https://ec.europa.eu/info/sites/default/files/
food-farming-fisheries/key_policies/documents/internal-convergence_en.pdf.
85 Member states may augment the above-threshold reductions. OECD, Policy Monitor 2015, p. 140.
86 A list of practices considered equivalent to the Ecological Focus Area exists at the EU level. OECD, Policy Monitor
2015, p. 139.
87 T he European Commission defines permanent grassland as land that has been in grass for more than five years. T he
ratio of permanent grassland to the total agricultural area should not decrease by more than 5% at the national level.
88 T his condition introduces a requirement to produce. Farms with less than 10 hectares are exempt, larger farms
between 10 and 30 hectares must grow at least two crops, and farms larger than 30 hectares must produce at least three
crops.
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the national direct payment budget) for a maximum of five years for new young
farmers (i.e., under 40 and beginning an agricultural activity).
4. Payments for Areas with Natural Constraints.89 Such payments make
additional income support available (using up to 5% of the national direct
payment budget) to overcome natural resource constraints defined based on eight
biophysical criteria.
5. Small Farmers Scheme.90 Smal farmers are eligible for additional payments of
up to €1,250 per farm (not to exceed 10% of the national direct payment budget).
Greening requirements and cross compliance restrictions also are waived.
6. Voluntary Coupled Support. In the form of commodity-specific payments,
voluntary coupled support is available for up to 18 products or product groups for
certain areas or types of farming for economic, environmental, and/or social
reasons (up to 13% of the national direct payment budget, with the possibility of
providing an additional 2% of coupled support for protein crops).
7. Redistributive Payment. Certain member states may grant redistributive
payments—that is, higher payments on the first hectares of farmland to meet
certain national goals. Such payments may be supportive of smal er farming
operations, for example.
The first three components are compulsory for member states, and the last four are optional
(Table A-1). Member states are required to use 30% of their national direct payment al ocations
to fund the greening component; the remaining 70% is to be used to fund the basic payment
component, subject to deductions of any amounts earmarked for the other potential components
listed above.
Under the 2013 reforms, the per-farm total BPS payments are also subject to degressivity—that
is, a mandatory minimum 5% reduction applied to total BPS support above €150,000 per
recipient.91 Sixteen member states have applied the minimum 5% reduction. Nine member states
have applied the 5% reduction after the value of salaries paid is deducted from the total BPS.
Nine member states have applied higher percentage reductions—some reaching as high as 100%,
resulting in a full capping of the BPS at levels varying from €150,000 to €600,000 per recipient.

89 Only a single member state has opted for this additional payment using 0.2% of its national direct payment budget.
90 No strict definition of small farmer is provided. T he actual size of the holding does not matter as long as the farmer
has an eligible area under the Basic Payment Scheme or Single Area Payment Scheme. See European Commission,
“T he Small Farmers Scheme,” May 2017, at https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/
key_policies/documents/small-farmers-scheme_en.pdf.
91 OECD, Policy Monitor 2015, p. 140.
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Figure A-1. CAP Direct Payments with Components, CAP 2014-2020

Source: European Commission, DG for Agriculture and Rural Development, “Overview of CAP Reform 2014-
2020,” Agricultural Policy Perspectives Brief, no. 5, December 2013.
Table A-1. CAP 2014-2020 Direct Payments (DP): Seven Potential Components
DP Policy Requirement
Share in National DP Budget
Member States
Mandatory Schemesa

1- Basic Payment per Hectare (BPS or SAPS)
DP budget minus sum of rows below
Al
(55% of overal DP budget)
2- Greening
30%
Al
3- Young farmers scheme
< 2%
Al
Voluntary Schemes

4- Areas with natural constraints
< 5%
1
5- Smal farmer scheme
< 10%
15
6- Commodity specific paymentsb
0-15% and up to 57%
27
(10% of overal DP budget)
7- Redistributive payments
< 30%
8
Source: European Commission, DG for Agriculture and Rural Development, as reproduced from OECD,
“Table 9.3. Direct payments in the CAP 2014-20,” in Policy Monitor 2015, p. 139.
Notes: BPS = basic payment scheme; SAPS = single area payment scheme.
a. Failure to comply with mandatory schemes wil result in penalties.
b. Four member states received approval to exceed the ceiling of 15% set for commodity-specific payments
from budget year 2015 onward.
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Author Information

Randy Schnepf

Specialist in Agricultural Policy

Disclaimer
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under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
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