The Agricultural Challenges in the Western Balkan Countries and the EU‘s Common Agricultural...

The Agricultural Challenges in the Western Balkan Countries and the EU‘s Common Agricultural Policy

University of Mostar

F. Fischler

Mostar, 21 May 2010

Outline

• Challenges:– The Economic Crisis

– Climate Change

– Growing Market Volatility

– Rural Zones: The Potential Loser of Globalisation?

• The Common Agricultural Policy (CAP):– The Beginning

– The Present System

– The Future European Agricultural Model

• The Rural Development Policy

2Mostar, 21 May 2010

The Economic Crisis


Europe‘s growth was serverly hit

4

The crises has wiped out progress

• GDP growth: -4 % in 2009, worst since the 1930s

• Industrial production: -20 % with the crises, back to the 1990s

• Unemployment levels:

– 23 million people

– 7 million more unemployed in 20 months

– Expected to reach 10.3 % in 2010 (back to 1990s level)

– Youth unemployment over 21 %

Presentation of J.M. Barroso to the Informal European Council, 11 February 2010


Unemployment has spread

6

Europe must react to avoid decline

• Our growth potential has been halved by the crisis: if we do nothing, we will end the decade with very low economic growth

• Ageing is accelerating: our working age population will be reduced by about 2 million by 2020, and the number of 60+ is increasing twice as fast as before 2007

• Productivity levels are lagging behind: two-thirds of our income gap with the US is due to lower productivity



Our room for manoeuvre is limited

• Our public finances are very severely affected: deficits at 7 % GDP on average and debt levels at over 80 %; 2 years wiped out 20 years of consolidation

• Our financial system still needs fixing: reduced bank lending is still holding back recovery

• Global competition is fierce: EU share of global exports is declining relative to China and India



Global competition is fierce

9

We must learn the lesson

• Our economies are interdependent: up to 70 % of car components for each car produced in the EU come from other Member States; overall, for € 1000 of growth in a Member State, around € 200 goes to other Member States via intra-EU trade

• In the crisis, the need for coordination became obvious; it is even more crucial for our recovery: decisions taken in one Member State impact the others

• The EU adds value: we should build on our strengths – the internal market, the euro – and on our leadership in the G20



Our Futures are Interlinked

11

Where Do We Want Europe in 2020?

12

From Exit to Lasting Recovery

• The „exit“ means the entry into a different economy: We will not return to the situation before the crisis

• We must face up long-term realities – globalisation, pressure on resources, ageing, technological trends – and tap our full potential

• 2020 starts now: Our recovery efforts must pave the way for sustainable growth and fiscal consolidation



Three priorities for sustainable growth and jobs

• Growth based on knowledge and innovation– Innovation

– Education

– Digital society

• An inclusive high-employment society– Employment

– Skills

– Fighting poverty

• Green growth: A competitive and sustainable economy– Combating climate change

– Clean and efficient energy

– Competitiveness

14


Mostar, 21 May 2010

Climate Change


1°C 2°C 5°C4°C3°C

Sea level rise threatens major cities

Falling crop yields in many areas, particularly developing regions

FoodFood

WaterWater

EcosystemsEcosystems

Risk of Abrupt and Risk of Abrupt and Major Irreversible Major Irreversible ChangesChanges

Global temperature change (relative to pre-industrial)0°C

Falling yields in many developed regions

Rising number of species face extinction

Increasing risk of dangerous feedbacks and abrupt, large-scale shifts in the climate system

Significant fall in water availability e.g. Mediterranean and Southern Africa

Small mountain glaciers disappear – melt-water supplies threatened in several areas

Extensive Damage to Coral Reefs

Extreme Extreme Weather EventsWeather EventsRising intensity of storms, forest fires, droughts, flooding, heat waves

Possible rising yields in some high latitude regions


The Moral Dilemma

17

Technologies to Reduce Global CO² Emissions


Growing Market Volatility


Evolution of commodity price indexes (1960-2009)

(2000 = 100)

0

100

200

300

400

500

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

Source: World Bank, March 2010

Agriculture Food Energy Fertilizers Metals/minerals


21

90

100

110

120

130

140

2000

Q01

2000

Q02

2000

Q03

2000

Q04

2001

Q01

2001

Q02

2001

Q03

2001

Q04

2002

Q01

2002

Q02

2002

Q03

2002

Q04

2003

Q01

2003

Q02

2003

Q03

2003

Q04

2004

Q01

2004

Q02

2004

Q03

2004

Q04

2005

Q01

2005

Q02

2005

Q03

2005

Q04

2006

Q01

2006

Q02

2006

Q03

2006

Q04

2007

Q01

2007

Q02

2007

Q03

2007

Q04

2008

Q01

2008

Q02

2008

Q03

2008

Q04

2009

Q01

Source: European Commission – DG Economic and Financial Affairs, based on Eurostat and Agriview data

Agriculturalcommodity prices

Food producer prices

Food consumer prices

Overall inflation(HICP)

Long-term Price Evolution along the Food Supply Chain

Mostar, 21 May 2010

Rural Zones: The Losers of Globalisation?


Effects of Globalisation

• Globalisation supports the move of production, capital and people towards the most competitive regions

• Globalisation favours concentration and urbanisation


Rural Depression

• Lack of Jobs

• Less advanced infrastructure

• Shortages in public services

• Not enough private investment

• Lack of enterpreneurship

• Outmigration

• Overaged population

• Problems with farm succession

• Frustration and depression


The Common Agricultural Policy (CAP)


The Beginning of the CAP -July, 30th 1962

• Increase of agricultural productivity

• Increase of the incomes of the agricultural working population

• Stabilization of markets

• Better food supply at reasonable price

• Common financial responsibility

The Goals:


The Beginning of the CAP – The Market Mechanisms

World Market Price

Intervention Price

Target Price

Board

er

Pro

tect

ion

Mark

et

Pri

ce

Exp

ort

Su

bsi

die

s


The Present System


• Quota systems

• Safetynet intervention

• Privat storage suppport

• Limited export subsidies

• Quality policy and protection of origin

• Producer organisations

Market Organisations


• Decoupled direct payments

• 3 applied models (HM, SPS, SAPS)

• Cross compliance

• Progressive modulation

Single Farm Payments


The Future European Agricultural Model


The European Agricultural Model

enshrined in the European Economic Model

The Union shall work for the sustainable development of

Europe based on balanced economic growth and price

stability, a highly competitive social market economy,

aiming at full employment and social progress, and a

high level of protection and improvement of the quality

of the environment. It shall promote scientific and

technological advance.

Article I-3 (3) Lissbon Treaty

3232Mostar, 21 May 2010

33

Future CAP-Objectives

A sustainable balance of:

• Food security– a competitive agriculture and food industry– based on knowledge, innovation and education– to be efficient and effective

• Environmental security– production of public goods– protection of the environment and nature– mitigating climate change and adapting to a changed climate

• Social security– income levels comparable with the average of the working population– farm succession


34

Future Market Instruments

• private storage

• limited intervention

• export promotion

• producer organisations and production chains

• quality policy and protection of origin

• price transparency and price transferability

• income safety net


Salzburg, May 12 2009Wien, 12. Mai 2009 35

Direct payments

Possible development of the 1st pillar

35

2002 fixed ceiling

French and Irish hope

Modulation and financial discipline

e.g. 20 % German estimate

British vision

35

36

Single Farm Payment System

0

100

200

300

400

500

600

700

Mal

ta

Gre

ece

Net

herla

nds

Bel

gium

Cyp

rus

Den

mar

k

Ital

y

Ger

man

y

Hun

gary

Irel

and

Slo

veni

a

Fra

nce

EU

-15

Bul

garia

Luxe

mbo

urg

Cze

ch R

epub

lic

EU

-27

Fin

land

Sw

eden

Aus

tria

Uni

ted

Kin

gdom

Slo

vaki

a

Spa

in

Pol

and

EU

-12

Por

tuga

l

Lith

uani

a

Rom

ania

Est

onia

Latv

ia

EUR/ben.EUR/ha

0

7000

14000

21000

28000

35000

42000

DP net ceilings fully phased-in (EUR/ha) EU flat rate DP net ceilings fully phased-in (EUR/beneficiary)


37


Regionalised Model

• National envelopes based on objective criteria

• Variability kept(arable land – grassland, Art 68, 70 etc.)


38


Flat Rate Model

• future level of SPS defined by the community budget

• criteria for national top-ups


39

Development of CAP expenditures and CAP reform

EU-10 EU-12 EU-15 EU-25 EU-27

0

10

20

30

40

50

60

70

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

% BIPMrd €

0,0%

0,1%

0,2%

0,3%

0,4%

0,5%

0,6%

0,7%

Exporterstattungen Marktstützung DirektzahlungenEntkoppelte Zahlungen Ländliche Entwicklung % des EU BIP

39

Development of CAP share of EU budget…

GAP Kosten 1992

0

20

40

60

80

100

120

140

Mrd €

GAP Ausgaben EU Haushalt

GAP Kosten 2007

0

20

40

60

80

100

120

140

Mrd €

GAP Ausgaben EU Haushalt

40

CAP Costs 1992 CAP Costs 2007

CAP Expend. EU Budget CAP Expend. EU Budget


GAP Kosten 2007 (relativ)

0%

10%

20%

30%

40%

50%

Anteil am BIP

EU-27

GAP AusgabenGesamte öffentliche Ausgaben der EU

…and different views of CAP costs…

GAP Kosten 2007 (absolut)

0

10

20

30

40

50

60

Mrd €

EU-27

GAP Ausgaben

41

CAP Costs 2007 (absolute) CAP Costs 2007 (relative)

CAP Expend. CAP Expend.

Total public EU spending

GDP share


The Rural Development Policy


43

The Rural Development Approach

• One Rural Development Programme for each Rural Region

• Bottom Up Programming and Management

• CAP offers a toolbox with defined conditions

• Co-financing

• Single Controlling


Rural development 2007 - 2013

Strategic guidance on 3 main objectives:

- Competitive agriculture and forestry;

- Improving the environment and countryside by supporting land management;

- Diversification of rural economies and improving of the quality of life.

Implementation within the framework of the 4 axes on the basis of the financial contribution - balance of the axis (10 /25/ 10 / 5).

Financial allocation of 88 billion € for the period 2007 - 2013


Rural Development Policy

AXIS 1. Improving competitiveness

Strengthening of the human potential

- Education and training

- Young farmer programme

- Early retirement

- Advisory service



AXIS 1.Improving competitiveness

Restructuring, modernisation and innovation

- Modernisation of farms and processing plants

- Strengthening of the food chain

- Restructuring after natural disasters



AXIS 1:Improving competitiveness

Quality improvements

- Adaptation to new legal or normative requirements

- Support of producer organizations

Specific measures in the new member states

- Restructuring of semi-subsistence farms

- Support for establishing producer organizations



AXIS 2.Improvement of the environment and the landscapes

Sustainable use of agricultural and forest land

- Compensation payments to farmers in mountainous and other disadvantaged areas

- Compensation payments in the context with NATURA 2000

- Agri-environmental measures

- Support of non-productive investments

- Afforestation measures



AXIS 3. Quality of life in rural zones and diversification of the rural economy

Diversification of the rural economy

- Non-agricultural activities

- Micro-enterprises

- Tourism industry

Improvement of the quality of life

- Services

- Village renewal

- Improvement and conservation of the rural heritage



AXIS 3. Quality of life in rural zones and diversification of the rural economy

Job education and information for rural actors

Support of strategy development for and sensibilisation of local actors



AXIS 4. Leader


52

The three 2007-2013 RD thematic axes in the MS

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Aus

tria

Bel

gium

Bul

gari

a

Cyp

rus

Cze

ch R

epub

lic

Den

mar

k

Est

onia

Fin

land

Fra

nce

Ger

man

y

Gre

ece

Hun

gary

Irel

and

Ital

y

Lat

via

Lit

huan

ia

Lux

embo

urg

Mal

ta

Net

herl

ands

Pol

and

Por

tuga

l

Rom

ania

Slo

vaki

a

Slo

veni

a

Spa

in

Sw

eden

Uni

ted

Kin

gdom

EU

-27

EU

-15

EU

-12

Axis 1: Competitiveness Axis 2: Environment and land management Axis 3: Quality of life and diversification

Source: European Commission - DG Agriculture and Rural Development

Mostar, 21 May 2010

Thank you for your attention!


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