Potential WTO challenges to the CAP

Since the early 1990s the EU's CAP has undergone considerable change with, first, a switch from market price support to direct payments in 1992 and, second, a further decoupling of support with the creation of the single payment scheme in 2003. Nonetheless, whether the current Doha Round of WTO trade negotiations is successfully completed or not, the CAP will come under renewed scrutiny, as a result either of negotiated reductions in support or of litigation through the WTO's dispute settlement process. This article discusses CAP market price and income support in the context of these likely WTO constraints.

The 2003 CAP Reform: Accommodating WTO Pressures

In 2003, the EU agreed a major reform of the common agricultural policy (CAP). Its centrepiece was a new Single Payment Scheme (SPS). Policy concerns at the time involved the budget, EU enlargement to the East, the WTO negotiations, and a perception (articulated by Commissioner Fischler) that there should be a shift of budget funds from CAP's Pillar 1 (price and income support) to Pillar 2 (rural development). We outline these concerns, conclude that the WTO was the main driving force of the reforms, set out the key parameters of the new support scheme, and outline some thoughts on the durability of the reformed CAP in the face of continued internal and external pressures.

Implications for food production, land use and rural development of the European Union's Single Farm Payment: Indications from a survey of farmers' intentions in Germany, Portugal and the UK

The 2003 reform of the European Union's (EU) Common Agricultural Policy introduced a decoupled income support for farmers called the Single Farm Payment (SFP). Concerns were raised about possible future land use and production changes and their impact on rural communities. Here, such concerns are considered against the workings of the SFP in three EU Member States. Various quantitative studies that have determined the likely impact of the SFP within the EU and the study countries are reviewed. We present the results of a farm survey conducted in the study countries in which farmers' responses to a decoupling scenario similar to the SFP were sought. We found that little short-term change was proposed in the three, rather different, study countries with only 30% of the farmers stating that they would alter their mix of farm activities. Furthermore, less than 30% of all respondents in each country would idle any land under decoupling. Of those who would adopt a new activity, the most popular choices were forestry, woodland and non-food crops. (c) 2007 Elsevier Ltd. All rights reserved.

The politics of in-work benefits: The case of the ‘active income of solidarity’ in France

In-work benefits have been introduced in a number of Bismarckian welfare regimes in a context of austerity despite being targeted at politically weak constituents and representing a deviation from prevailing welfare institutions. This article addresses this puzzle by looking at the introduction in 2008 of an in-work benefit scheme in France, the Active Income of Solidarity. The analysis reveals that this reform was the result of a cross-cutting alliance between the conservative party and employers, as well as parts of the socialist party and the union movement. The alliance was possible thanks to actors’ multiple interpretations of the reform. The reform was difficult to oppose given its support by experts and public opinion and because it entailed an increase in revenues for low-income workers.

Income differentials and corporate performance

Purpose – This paper seeks to make the case for new research into the perceived fairness and impact of executive pay. Design/methodology/approach – The paper reviews the literature regarding executive compensation and corporate performance and examines the evidence that a more egalitarian approach to pay could be justified in terms of long-term shareholder value. Findings – There would appear to be no evidence to suggest that the growing gap between the pay of executives and that of the average employee generates long-term enterprise value, and it may even be detrimental to firms, if not the liberal capitalist consensus on which the corporate licence to operate is based. Research limitations/implications – The paper outlines a new approach to tracking income differentials with corporate performance through the development of a corporate Gini coefficient “league table”. Social implications – The proposed research is expected to point towards better practice in executive remuneration, and support the growing momentum for a sustainable and enlightened approach to business, in which the key goal is long-term enterprise value based on a fair distribution of the rewards of business. Originality/value – In producing a deeper understanding of the impact of widening income differentials, the paper should be of interest to senior executives in publicly quoted companies as well as press commentators, government officials and academics.

Coordination, inclusiveness and wage inequality between median and bottom income workers

What explains cross-national variation in wage inequality? Research in comparative political economy stresses the importance of the welfare state and wage coordination in reducing not only disposable income inequality but also gross earnings inequality. However, the cross-national variation in gross earnings inequality between median and low income workers is at odds with this conventional wisdom: the German coordinated market economy is now more unequal in this type of inequality than the UK, a liberal market economy. To solve this puzzle, I argue that non-inclusive coordination benefits median but not bottom income workers and is as a result associated with higher – rather than lower - wage inequality. I find support for this argument using a large N quantitative analysis of wage inequality in a panel of Western European countries. Results are robust to the inclusion of numerous controls, country fixed effects, and also hold with a sample of OECD countries. Taken together these findings force us to reconsider the relationship between coordination and wage inequality at the bottom of the income distribution.