The dilemmas of EU agricultural policy

Kiss, Judit

Keywords: EU, dilemmas of agricultural policy, agricultural strategy, agricultural financing, competitiveness

While EU Common Agricultural Policy (CAP) remained almost unchanged to the end of the 80’s, since the early 90’s the regulation of EU agriculture has been characterised by continuous reform. The most recent CAP reform took place in June 2003, however, as the CAP faces many unresolved challenges, it is likely that this reform will not be last.

The EU has no common agricultural policy; therefore, Hungary has the opportunity to develop an agricultural strategy suited to its own interests and assets. This agricultural strategy needs to be embedded in the country’s economic development strategy on the one hand, while on the other, it shouldn’t contradict the fundamental aims of the CAP, it should be achievable using CAP tools and joint financing from the common and national budgets.

We need to prepare for the fact that partly due to changes in CAP, partly as a result of EU expansion, competition is increasing on at least three levels. Firstly, on the internal, national market, which in relation to the EU-25 is no longer protected by any trade policy instruments and regarding third countries the conclusion of WTO negotiations will see a drop in customs protection. Secondly, within the EU internal market, competition is growing in relation to the EU-15, because the lower levels of support for new accession countries means they have a competitive disadvantage, while also being in increasing competition with each other due to differing costs of production factors. Furthermore, we also have to face the fact that competition is also growing on third country markets, i.e. those outside the EU, partly due to rising production costs, declining internal subsidies and the end of export subsidies, partly because of the greater efficiency of some developed countries’ agriculture and some developing countries’ (e.g. Brazil’s) lower production costs.

Improving competitiveness requires classic competitiveness factors, i.e. improvements in cost competitiveness, as well as adherence to quality, food safety, plant and animal health and environmental protection standards.

In relation to utilising the CAP, EU accession has only given Hungarian agrarian economic policy a short-term foothold. It is well known that Hungary chose the SAPS (a Single Area Payment Scheme) for direct payments, which will be utilised for three years and from 2007 will revert to the Single Farm Payment Scheme introduced by the EU’s 2003 agrarian reform, in other words a uniform farm subsidy system. We have little information, however, about the utilisation and in particular the effects of this system, as even older member States have only been using it since 2005.

Full article