Title III of the Treaty on the functioning of the EU deals with the sectors of agriculture and fisheries. The objectives of the common agricultural policy are specified in Article 39 of the Treaty on the functioning of the EU (ex-Article 33 TEC): higher agricultural productivity; guarantee of a fair standard of living to farmers; market stabilisation; supply security and reasonable prices for consumers. In order to attain these objectives, Article 40 of the TFEU (ex Article 34 TEC) calls for the establishment of a common organisation of agricultural markets which, depending on the product, may take one of three forms: common rules on competition, compulsory coordination of the various national market organisations or a European market organisation. It is interesting to note that it is always this last and most stringent concept that has been applied to the common organisation of agricultural markets.
The other Articles of the Treaty devoted to agriculture were chiefly transitional provisions. Article 43 EEC, however, was of special importance. It stipulated that a conference of the Member States was to be called by the Commission as soon as the Treaty had entered into force to enable the Member States to compare their agricultural policies and consequently come to an agreement on an outline of the common agricultural policy. This conference was called by the Commission in Stresa (Italy) in July 1958. Agricultural officials from the six signatory States, despite their different points of view and different situations as importers or exporters of agricultural produce, succeeded in reaching a general agreement on the protection of the common agricultural market against distorted external competition, on the need for a structural policy and a farm price policy and on the principle that farmers should be paid in a manner comparable to workers in other sectors. The Stresa Conference clarified the agricultural objectives of the Treaty, stipulating that for European agriculture to be internationally competitive, its structures should be overhauled, but that the family nature of European farms should be preserved; that for common farm prices to offer a decent standard of living, they should be set above world prices but not at a level encouraging over-production.
The market policies were later supplemented by rural development policies to form the second pillar of the CAP. The guiding principles for the CAP, market and rural development policies, were set out by the European Council of Göteborg of June 2001 [see section 16.2]. According to its conclusions, strong economic performance must go hand in hand with the sustainable use of natural resources and levels of waste, maintaining biodiversity, preserving ecosystems and avoiding desertification. To meet these challenges, the CAP should contribute to achieving sustainable development by increasing its emphasis on encouraging healthy, high-quality products, environmentally sustainable production methods, including organic production, renewable raw materials and the protection of biodiversity.
The EEC Treaty was prudent as regards the applicability of competition rules to the agricultural sector, a sector where State intervention was rife. According to Article 42 (actual Article 42 TFEU), the applicability of the general Articles on competition was subordinated to specific provisions of the common agricultural policy. As early as 1962, however, the Council decided that the Treaty competition rules applicable to undertakings (Articles 85 to 91 EEC, Articles 101 to 106 TFEU) should also be applied to agricultural undertakings [see section 15.3]. Only cooperatives and farming associations could be granted a special regime. As it turned out, certain common market organisations assigned specific functions to producers' groups, thus involving them in the common policy [Regulation 1257/1999].
Competition rules for State intervention (Articles 92 to 94 EEC, actual Articles 107 to 109 TFEU) became applicable to agricultural markets as and when common market organisations were established. Many of the market organisations consequently incorporate specific provisions on national or European aid. The Member States became obliged to notify the Commission of all aid granted to agriculture as early as 1962. Since this date, the Commission has treated aid to agriculture in the same way as all other national aid.