2. Slovene Agriculture and European Union Prof. Dr. Emil Erjavec, Negotiation Team for the EU Accession of Slovenia University of Ljubljana,

3. The elements of the accession process legal and institutional adjustment harmonisation of legal system harmonisation of policies implementation capacity upgrading accession negotiations legal and institutional adjustment derogations and transitional periods “money and power” increase of competitiveness liberalisation of the foreign trade with the EU structural adjustment

4. 3 Slovenia: key facts on agriculture and agricultural policy the preparation and adjustment strategy the status of the agricultural accession negotiationsthe status of the agricultural accession negotiations economic accession effectseconomic accession effects 1. What could CAP really bring to the Slovene farmers? 2. With whom, how and when we have negotiations? 3. Are all candidates the same? How they should be threated?

5. 4 The common views on CEEC agriculture - agriculture is an important economic sector (labour, output, income) - there is significant production potential for increase of production (land) - significant differences in the farm structures with the EU - there are low producer prices and non-comparable policy measures - after accession there will be significant increase in production, income differences in the rural areas, unstable macroeconomic situations

6. 5 Importance of agriculture - the share on GDP (%), 1997

7. 6 Share of agriculture in less favoured areas AA (ha) LU Source: SORS

8. 7 Farm size (ha UAA / farm, 1997) Source: SORS

9. 8 Self-Sufficiency in % (1997/98) Source: KIS

10. 9 Agricultural Policy - Objectives The important differences in the policy at the begin of transition The long-term objectives of agricultural policy were set in 1993 (Agricultural Development Strategy of Slovenia). The so-called eco-social concept of agricultural policy was adopted with an emphasis on the multifunctionality of agriculture The objectives do not differ essentially from the objectives pursued by the CAP. The introducing of the CAP elements started early in the transition.

11. 10 Market Price Policy Adjustment

12. Three pillars of adjustment and implementation capacity upgrading domestic agric.policy Comparable legal system Law on agriculture Reform of agricultural policy introduction of comparable market organisations introduction of direct payment attention to the rural development policy increasing of budget (100% between 1997 and 2003) pre-accession aid SAPARD Harmonised institutions comparable programming and implementation structure Agency for agricultural markets and rural development

13. Agricultural budget (mio € ) 29,2 33,5 63,4 57,3 30,9 36,0 33,2 42,6 21,0 21,4 23,8 21,5 43,0 46,5 51,2 58,4 14,5 0 20 40 60 80 100 120 140 160 180 200 199219931994199519961997199819992000 Other ministry Implentations costs, forestry, fishery Agricultural services Rural development measures Market-prices policy

14. 13 Aggregate Producer Prices and Revenues Levels in Slovenia, 1993-2000 (index EU=100) Source: SORS, EUROSTAT, KIS

15. 14 Producer prices and revenues in Slovenia, 2000 (index EU=100) Source: SORS, EUROSTAT, KIS

16. Producer Support as % of gross farm receipts

17. Timetable of Negotiations 1998-1999: “screenings” - analytical comparison of acquis (differences, step of adjustments, negotiation points) ) 1999: negotiations position (implementation promises, minor requests on derogation's and transitional periods, nothing on quotas and financial matters) 2000 - 2001: two rounds of EU common positions, 1 technical meeting, 3 additional clarifications, nothing on “money” 2002: end of negotiations? ……………………. 3,5 years of negotiations, EU is still playing the tactic of delaying the process, the key issues are still not be open

18. 17 Status of negotiations - implementation capacity the process is in the final stage the remaining issues: –state aids –administration of the milk quotas –rural development - implementation infrastructure

19. 18 Status of negotiations - requests  transitional periods for the distribution of quota and premium rights to individual producers - milk, suckling cows, sheep and goat premium until 31 December 2012. - structural change is necessary, additional blockade for farm which improve their size and efficiency  transitional periods for“categories of drinking milk” for the period until 31 December 2005. National provisions concerning fat content in drinking milk remain applicable.  wine “package”: - wine growing areas (request for “B” zone) - derogation for Cviček PTP (the blending of white and red grape varieties and provisions on minimum alcoholic strength). - translation also in other language than Slovene concerning the labelling of information on wine

20. 19 Status of negotiations - quotas and financial arrangements EU no position before January 2002, elements in discussion AGENDA 2000 financial framework - limited resources Reference period for settlement of the quotas (existing production figures in the “democracy”) the full existing CAP, according to the financial resources candidates are homogeneous? “phasing in” for direct payments (start with 10-20% level?) no effects of the “mid-term review” “bing bang” enlargement (catching up, no real differentiation's) SLO equal treatment requested, however flexible understanding farm income should not fall after accession production is on low level, quotas and transfer of quotas could blocked the development to the more efficient agriculture, abandoning of the LFA regions

21. Analysis of the accession effects - methods - The estimation were made by agricultural sector model APAS in combination with Policy Analysis Matrix PAM

22. APAS Framework Own-Cross Prices Input Prices Policy Theoretical Restrictions Deflator Land Constraint Own-Cross Prices Input Prices Technology Policy Deflator Area or HerdYield Production Own-Cross Prices Income Policy Deflator Population Waste and Other Uses Demand Trade

23. PAM Framework Market Prices Social Prices (BPP) Yields Input Prices & Quant, disaggr. into trad. and nontr. part Private and Social Profitability Competitiveness (DRC) Protection (NPC, EPC) Income Tradable Costs Non-tradable Costs Revenues (at Market and Social Prices)

24. Accession scenarios The impact of different budgetary treatments by the EU? The impact of the competitivness of the agro-food sector?

25. Budgetary implications ( mio €)

26. (Incentive) Price Projection (BS = 100) Producer Price Incentive Price

27. Supply & Demand (BS = 100) Demand Supply

28. Net trade (1000 t) & Self-sufficiency (%) Net trade Self-sufficiency

29. Net Income (SIT/unit) and “rentability” (%) Net Income Rentability

30. Agricultural Income (BS = 100)

31. 30 Conclusions:  Farm income will probably decrease after accession. The level of decrease depends: on negotiated CAP the level and efficiency of domestic reforms and the competitiveness of the agro-food sector Production level would also not increase. Quota based system is unfavourable for small and extensive Slovene producers. Policy implications: Tough negotiations! Special solutions necessary... Use the time available before the accession to reduce market price distortions to invest in farm and the food industry modernisation Further develop measures for support of rural areas to diversify rural economy and create alternative income 1. What could CAP really bring to the Slovene farmers?

32. 31 Conclusions:  The key issue is how to convince the domestic interest groups. Internal negotiations are the hardest part of the game.  EU is only giving the frame for accession. Real negotiations are still not existed. Delaying tactic prevails. Taking the rules on own costs! Sometimes egoistic, bureaucratic and un-fair approach (“cat and mouse”). Public fears and existed rights for the member states design the process. Policy implications: In last year is everything open. EU to take care also on the candidates to balance the results of accession. Take it or leave it approach. Be prepared for everything. Clear estimation on the results. Fair information policies. However, that is the only window of opportunities... 2. With whom, how and when we have negotiations?

33. 32 Conclusions:  The significant differences between candidates (income level, welfare, importance of agriculture, production potential, price and policy levels).  The EU is seeking for horizontal approach. Mistake... Policy implications: Differentiation and flexible approach for both side. Three solutions how to reach equal treatment: renationalisation transitional payments more attentions to the second pillar 3. Are all candidates the same? How they should be threated?