Question

The Republic of Zander is a member of the European Union (EU). As an EU member, the Republic of Zander gives cash grants to domestic agricultural producers. Which of the following instruments of trade policy is being used by the government of The Republic of Zander?

Answer 1

Answer:

The Common Agricultural Policy.

Explanation:

The Common Agricultural Policy (CAP) is a system of subsidies given to farmers in the European Union (EU). First introduced in 1962, the CAP was drafted to address two main concerns: food security and social stability. It was argued that, unless there were some mechanisms within the European Economic Community that supported agriculture directly, the living standards of European farmers would dwindle as they wouldn't be able to compete with cheaper crops from outside Europe. This would force many of them to abandon agriculture and find work elsewhere, thus lowering agricultural production and endangering food security in Europe. Also, farmers who didn't have enough to eat could become a source of social unrest. Subsidies in the form of direct cash grants to European farmers address these concerns and keep agriculture at a very high level in the EU.