CAP Second Pillar: From structural policies to rural development Lecture 15. 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 in next two lectures: –Is there a need for an EU rural development policy? –What should its objectives be? –Should it be funded by EU or national budgets? –Has RD funding been well spent?

Origins in policies to promote agricultural restructuring Why EU involvement? 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” reportFuture of Rural Society 1988 Reform of the EU structural funds –Regional, Social, Guidance and Fisheries –Five objectives –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 Basic principles 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

Extended Impact Assessment of the Commission’s RDR proposal 2004 Option 1: Improved status quo –MS free to draw up RD programmes choosing any combination of measures from the three thematic axes. Option 2: A more strategic approach –Community would first outline RD priorities –Set minimum levels of spending under each Axis Option 3: A more territorial approach –As for Option 2, but with territorial targeting in each policy axis –Maximum limit set on Axis 2 agricultural competitiveness

Rural Development Policy One single rural development fund One single programming system One single set of financial rules One single control system For all rural areas in the EU

Rural Development Policy : Foundations Rural Development « LEADER » Axis Axis 1 Competi- tiveness Axis 2 Environment + Land Management Axis 3 Economic Divers. + Quality of Life Single set of programming, financing, monitoring, auditing rules Single Rural Development Fund

Programme balance Competitiveness objective: total programme funding at least 10% (Commission proposal 15%) Environment/land management: at least 25% Quality of life and diversification: 10% (Commission proposed 15%) Leader approach: at least 5% (Commission proposed 7%)

Programming steps EU strategy document setting out the EU priorities for the priority axes National strategy plans translating the EU priorities to the member state situation and ensuring complementarity with Cohesion policy National or regional rural development programmes articulating the four axes through measures

Community strategic guidelines for rural development RDR sets out objectives and measures Guidelines set out priorities and key actions Six strategic guidelines, three addressed to the thematic axes –Emphasise innovation, R&D, training, entrepreneurship in Axis 1 –Biodiversity and landscape, water and climate change in axis 2 –Capacity building for local strategy development and support for small scale investments in Axis 3

Resources available for Pillar 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 spending Financial Perspective € billion 2004 prices TOTAL Commission proposal Final outcome Dec 2005 EU EU Total Before compulsory modulation. Voluntary modulation without co-funding requirement for up to 20% of direct payments agreed. Source: Agra Europe

Rural development spending Financial Perspective Million €2006 budget 2013 proposed Total EU-158,0005, bn 10 NMS + 22,9024, bn Total10,54410, bn

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