CAP Second Pillar: From structural policies to rural development Lecture 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” reportFuture of Rural Society 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 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

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