The agricultural sector employed only 5.5 percent of the working population in 1999 and contributed only 2.5 percent of the GDP in 2000, with an output of over US$36 billion. However, in the southern regions of Basilicata, Calabria, and Molise, agriculture accounts for just over 20 percent of local employment. The decline of this sector in terms of employment and the GDP is, however, compensated for by ever-accelerating productivity. The agricultural profile is in line with all other Western European countries and is due specifically to the effects of the Common Agricultural Policy (CAP) of the European Union (EU). It is impossible to examine Italian agriculture without taking CAP into consideration since CAP is the basis for agricultural support across Western Europe. This EU policy ensures that subsidies and incentives are offered in order to sustain prices and guarantee a certain level of income to farmers. Thus, prices are artificially maintained, and if agriculture were to be liberalized in full, the sector would collapse throughout Europe. CAP was launched in the late 1950s to improve efficiency and as of 2001 accounts for most of EU expenditures, a staggering US$45 billion.
The CAP was not very successful in Italy in its initial stages because subsidies did not cover several traditional Mediterranean products such as olives, tomatoes, oranges, and lemons. When these were finally included, the more positive aspects of the policy emerged. First, it provided the necessary capital for mechanization, and Italy underwent rapid mechanization during the 1980s. Second, it offered an incentive to merge and thus enlarge the average farm. Through CAP, the EU buys up surplus products and, as a consequence, larger farms can be very beneficial to the economy. Finally, CAP ensures that all traditional Italian agricultural products are given some protection against cheap competition, with export traders subsidized to supply cut rates. Unfortunately, CAP seems to have favored northern farmers, but the government is attempting to correct the effects of CAP by offering grants and tax breaks to small farms in the south.
With only 5 percent of the land under cultivation, Italy is not self-sufficient in agricultural products, yet it enjoys an abundance of agricultural resources. Despite a negative balance of trade in agriculture, productivity is high, and the Mediterranean climate ensures that a variety of products are available both for internal consumption and external markets. Italy is a world leader in olive oil production and a major exporter of rice, tomatoes, and wine. Moreover, BSE, or "mad cow" disease, caused a major drop in beef consumption, while an increasing number of consumers turned towards organically grown produce.
The Italian government has always been a staunch defender of its national agricultural sector when it comes to negotiating production quotas with EU partners or seeking grants to defend the sector from decline. Funds to buy machinery, to compensate farmers for over-production, and to pay EU-imposed fines were constantly made available by the government. However, the Italian government was unable to stop the most recent CAP reform of 1997, which caused spending on Mediterranean products to decline in favor of increased spending for northern European dairy farmers.
In addition, Italian agriculture is suffering from changes in the climate and very poor management of the land. Large-scale farmers in the north live reasonably well, particularly in comparison to their counterparts in the south. The regional disparity is due partly to the effects of CAP and partly to organizational differences. In northern and central Italy, co-operatives has dominate. These farming co-operatives provide widespread support, both socially and economically, for their members, and help in rationalizing production and distribution. In the south, farmers have no production and distribution networks on which they can depend, and the smaller scale of their operations, combined with their isolation, curtails their ability to compete in the market.
Meat has never been a major Italian product, and most of the meat consumed in Italy is imported from other European countries, particularly Ireland and Germany. Italy is also quite weak in the dairy farming sector, although it exports a handful of distinctive cheeses such as parmesan, mozzarella, and gorgonzola. Fruit is grown almost exclusively in the south, with most of the oranges and lemons coming from Sicily. Apples grow in Trentino Alto Adige. But the real strength of Italian agriculture is the production of olives, wine, and tomatoes.