CAP Second Pillar:From structural policies to rural

developmentLecture 10.

Economics of Food Markets

Alan Matthews

Lecture objectives

• To understand the background to and functioning of the Second Pillar of the CAP

• To trace the (slow) transformation from sectoral policies focused on agriculture to more integrated rural development focus

• Questions to think about:– Is there a need for an EU rural development policy?– What should its objectives be?– Should it be funded by EU or national budgets?

Origins in policies to promote agricultural restructuring

• The Mansholt Plan 1968 three socio-structural directives– farm modernisation, early retirement, vocation training

• Less favoured areas directive 1975• Mid-1980s – Integrated Mediterranean

Programmes

Beginning of EU rural policy

• 1988 “Future of Rural Society” report

• 1988 Reform of the EU structural funds– Regional, Social, Guidance and Fisheries– Principles of geographical concentration,

programming, additionality and partnership

• 1991 LEADER programme– Bottom up approach to rural development

MacSharry reforms 1992

• Introduction of accompanying measures– Agri-environment scheme– Afforestation– Early retirement– [Less favoured areas]

• Increasing attempt to push rural development up the policy agenda

Agenda 2000

• Introduction of Second Pillar concept

• Rural Development Regulation 1999– Menu of 22 measures in three groups

• Restructuring/competitiveness• Environment/land management• Rural economy/rural communities

• Complex funding arrangements

Mid Term Review

• New Rural Development Regulation– Expanded menu of measures in three Axes

• Improving competitiveness of agricultural and forestry sector• Land management (including environmental measures and

animal welfare)• Diversification of the rural economy and improving quality of

life in rural areas• LEADER• Minimum spending thresholds on each axis

• New single Rural Development Fund– European Agricultural Fund for Rural Development

Resources available for Pillar 2 2007-2013

• Despite the rhetoric favouring an expansion of Pillar 2 policies, less funding will be available in the next Financial Perspective for RD policies, particularly in the EU-15

• Compulsory modulation introduced as part of the Luxembourg compromise will contribute relatively small amounts of additional funding (estimated at €1.2 billion per year)

Rural development spendingFinancial Perspective 2007-13

€ billion 2004 prices TOTAL

Commission proposal

Final outcome

Dec 2005

EU-15 50.2 36.7

EU-10 + 2 38.5 33.1

Total 88.7 69.8

Before compulsory modulation.

Voluntary modulation without co-funding requirement for up to 20% of direct payments agreed. Source: Agra Europe

Rural development spendingFinancial Perspective 2007-13

Million € 2006 budget

2013 proposed

Total 2007-2013

EU-15 8,000 5,167 36.7 bn

10 NMS + 2 2,902 4,890 33.1bn

Total 10,544 10,057 69.8 bn

The Saraceno vision

• Distinguish between sectoral and territorial functions– “agricultural sector and rural areas are substantially

the same thing”– “rural areas are less competitive than urban areas in

attracting resources”

• Sectoral function link to CAP reform– Providing multifunctional payments in exchange for

public good services– Structural aid for investments promoting quality food

production, on farm diversification and modernisation

The Saraceno vision

• Territorial function– Area-based policies promoting

competitiveness and diversification of rural areas

• Both roles for EU rural development policy are valid but need to be explicitly articulated

• The argument is set out in the paper available on the course website