ABSTRACT
Until 1992, trade restrictions, market price support and supply management policies were the major tools of the CAP. To mitigate the well known weaknesses of this policy conception a process of ‘decoupling’ was initiated with the Mac-Sharry reform in 1992. Direct payments (DP) were granted to producers of arable crops, beef and veal, sheep meat and goat meat as compensation for lower administrative prices. In the Agenda 2000 reform, this process continued by including the milk sector and by establishing the program for rural development (the “second pillar” of the CAP). After the 2003 CAP reform fully or at least partially decoupled “single farm payments” (SFP) were implemented to mitigate the negative effects of price policy as well as payments based on historical areas and heads of livestock after 1992 (OECD 2006a, 2006b).
