John Birchall - Economist.com

Since the reform of the Common Agricultural Policy, Rural Development is playing an increasingly important role in helping rural areas to meet the economic, social and environmental challenges of the 21st century. Rural areas make up 90 percent of the territory of the enlarged EU and the new legal framework points more clearly to the direction of boosting growth and creating jobs in rural areas – in line with the Lisbon Strategy – and improving sustainability - in line with the Götenborg sustainability goals.

The future Rural Development policy 2007-2013 will focus on three areas in line with the three thematic axes laid down in the new rural development regulation: improving competitiveness for farming and forestry; environment and countryside; improving quality of life and diversification of the rural economy. A fourth axis called "Leader axis" based on experience with the Leader Community Initiatives introduces possibilities for locally based bottom-up approaches to rural development.

The new programming period provides a unique opportunity to refocus support from the new rural development fund on growth, jobs and sustainability.

The European legal framework being established Member States can now elaborate their national strategy plans and rural development programmes before submitting them to the European Commission.

For each set of priorities, the EU strategic guidelines are suggesting key actions. Member States shall prepare their national rural development strategies on the basis of six community strategic guidelines, which will help to:

identify the areas where the use of EU support for rural development creates the most value added at EU level;
make the link with the main EU priorities (Lisbon, Göteborg)
ensure consistency with other EU policies, in particular cohesion and environment;
accompany the implementation of the new market orientated CAP and the necessary restructuring it will entail in the old and new Member States.

The six strategic guidelines are:

Improving the competitiveness of the agricultural and forestry sectors
Improving the environment and the countryside
Improving the quality of life in rural areas and encouraging diversification
Building Local Capacity for Employment and Diversification
Translating priorities into programmes
Complementarity between Community Instruments

Towards a more sustainable agricultural production

Sustainable agriculture in Europe is our means of ensuring that future generations can enjoy the benefits of Europe's unique environmental heritage and natural resources, as we do today.

Achieving sustainability, however, means meeting three challenges:

an economic challenge (by strengthening the viability and competitiveness of the agricultural sector);
a social challenge (by improving the living conditions and economic opportunities in rural areas);
and an ecological challenge (by promoting good environmental practices as well as the provision of services linked to the maintenance of habitats, biodiversity and landscape).

Sustainable agricultural production must also reflect the concerns of consumers, particularly as regards quality, safety and traditional/organic production methods.

Addressing the environmental dimension of the CAP includes at one level measures to improve the environmental soundness of agricultural production (e.g. investing in improved technology, promoting extensification). On the other, it means measures securing the function of farmers as stewards of the countryside and to encourage them to actively preserve the rich rural landscape and biodiversity.

At the core of the Community's agri-environmental strategy within the CAP are targeted measures which reward farmers for environmental services in rural areas, over and above good agricultural practice and environmental legislation. The inclusion of such measures into all rural development programmes implemented by Member States is compulsory.

It should not be thought that more environmentally friendly agriculture means old-fashioned methods. For example, organic farming (one form of sustainable farming) uses modern, yet natural, plant-protection methods, which avoid the use of pesticides. Research carried out in universities and agricultural institutes has a key role to play in promoting innovative farming techniques that meet environmental, health and quality standards.

Food quality in all its aspects

For some years now, European consumers' choices have tended to favour healthier and more flavoursome food of higher nutritional value, produced by more environmentally friendly methods. The guiding principle behind this development is quality: in this complex concept, vital issues are at stake.

A question of definition

But what does 'quality' mean in this context? Food safety is, of course, the prime condition for food quality and an absolute, non-negotiable must. This is also true of compliance with legally established standards for the environment and animal welfare since they relate to the protection of natural resources and requirements of an ethical nature, in addition to the characteristics of the products. Although food's nutritional value is subject to rules on labelling, this is more relative, being linked to eating habits. Other aspects of quality are optional because they have a subjective component and depend on consumer preferences; there are, for instance, flavour, smell and appearance. Some products also have an added value because they are produced in a particular region or by a traditional method (quality labels) or because their production methods pay special attention to the environment and animal welfare (e.g. organic farming).

An area for legislating

The Community's legislative activity in this area is considerable, although it has been directed at very different levels depending on the type and urgency of the problems. Legislation in the food safety field started in the 1960s, grew more intense in the 1990s with the advent of the single market, and, since 1994, has focused on combating bovine spongiform encephalopathy (BSE). The 1992 and 1999 CAP reforms emphasised agri-environmental measures and aid for extensification, and also in 1992 there was the introduction of European quality labels. Community legislation cannot and should not take over entirely from that of the Member States and attempt to cover all aspects of quality; rather, it should seek to work in tandem on pursuing a policy to foster quality.

EU and animal welfare: policy objectives

The Treaty of Amsterdam, in force since 1st May 1999, lays out new ground rules for the actions of the European Union (EU) on animal welfare in a special “Protocol on the Protection and Welfare of Animals". It recognises that animals are sentient beings and obliges the European Institutions to pay full regard to the welfare requirements of animals when formulating and implementing Community legislation.

The protocol indicates the responsibility of the EU to legislate in improving the welfare of animals and in preventing cruelty against animals and their mistreatment in areas covered by the Treaty (such as agriculture). In other areas not covered by the Treaty the EU has no competence so that these issues remain under the sole responsibility of the Member States (e.g. the use of animals in competitions, shows, cultural or sporting events such as bullfighting, dog-fighting and dog-racing).

"The new Treaty establishing a Constitution for Europe signed on 29 October 2004 by the Heads of State or Government of the 25 Member States and the 3 acceding and candidate countries also retain the commitment to ensuring the protection of animals. Article III 121 provides that the Union and the Member States shall pay full regard to the requirements of animal welfare in formulating and implementing the Union's agriculture, fisheries, transport, internal market, research and technological development and space policies. This will be done while respecting the legislative or administrative provisions and customs of Member States relating in particular to religious rites, cultural traditions and religious heritage."

Food Safety

The Strategic Priorities of the White Paper are:

To create a European Food Safety Authority

To consistently implement a farm to table approach in food legislation

To establish the principle that feed and food operators have primary responsibility for food safety; that Member States need to ensure surveillance and control of these operators; that the Commission shall test the performance of Member States' control capacities and capabilities through audits and inspections

Reinforced controls for better consumer protection

The EU has build up a significant body of laws on food safety, animal health, animal welfare and plant health which are binding in all countries of the Union and which partially apply to non-EU countries exporting animals, animal products, plants and plant products to the EU.

While the primary responsibility for ensuring that these laws are respected rests with the fifteen Member States, the Commission shares responsibility by ensuring that these EU laws are applied by the Member States. It fulfils this responsibility through the Food and Veterinary Office which was established in April 1997. The Office carries out audits and on-the-spot checks on food safety controls in the Member States and in countries exporting to the EU and reports its findings and recommendations to national and EU authorities and to the public.

The European Food Safety Authority (EFSA), legally established in 2002, provides independent scientific advice on all matters linked to food and feed safety - including animal health and welfare and plant protection - and provides scientific advice on nutrition in relation to Community legislation. The Authority communicates to the public in an open and transparent way on all matters within its remit. EFSA's risk assessments provide risk managers (consisting of EU institutions with political accountability, i.e. European Commission, European Parliament and Council) with a sound scientific basis for defining policy driven legislative or regulatory measures required to ensure a high level of consumer protection with regards to food safety.

How does it work and how much does it cost?

Agriculture has been one of the flagship areas of European collaboration since the early days of the European Community.

In negotiations on the creation of a Common Market, France insisted on a system of agricultural subsidies as its price for agreeing to free trade in industrial goods.

CAP OBJECTIVES

To increase productivity

To ensure fair living standards for the agricultural community

To stabilise markets

To ensure availability of food

To provide food at reasonable prices

From Treaty of Rome, article 39

The Common Agricultural Policy began operating in 1962, with the Community intervening to buy farm output when the market price fell below an agreed target level. This helped reduce Europe's reliance on imported food but led before long to over-production, and the creation of "mountains" and "lakes" of surplus food and drink.

The Community also taxed imports and (from the 1970s onward) subsidised agricultural exports. These policies have been damaging for foreign farmers, and made Europe's food prices some of the highest in the world. European leaders were alarmed at the high cost of the CAP as early as 1967, but radical reform began only in the 1990s.

The aim has been to break the link between subsidies and production, to diversify the rural economy and to respond to consumer demands for safe food, and high standards of animal welfare and environmental protection.

How much does it cost?

The cost of the CAP can be measured in two ways: there is the money paid out of the EU budget, and the cost to the consumer of higher food prices.

The EU spent 49bn euros (£33bn) on agriculture in 2005 (46% of the budget), while the OECD estimates the extra cost of food in 2003 at 55bn euros. The CAP budget has been falling as a proportion of the total EU budget for many years, as European collaboration has steadily extended into other areas. It has been falling as a proportion of EU GDP since 1985.

EU member states agreed in 2002 that expenditure on agriculture (though not rural development) should be held steady in real terms between 2006 and 2013, despite the admission of 10 new members in 2004. This means that the money paid to farmers in older member states will begin to decline after 2007. Overall, they will suffer a 5% cut in the 2007-13 period. If Romania and Bulgaria are paid out of the same budget when they join in 2007 or 2008, that will entail a further cut of 8% or 9%, the Commission says. Agricultural expenditure declined slightly in 2004, as compared with 2003 but has jumped in 2005 as a result of the admission of 10 new members. Under the European Commission's budget proposals for 2007-13, it will peak in 2008/2009, in nominal terms, then decline until 2013

Who gets the money?

France is by far the biggest recipient of CAP funds. It received 22% of the total, in 2004. Spain, Germany and Italy each received between 12% and 15%. In each case, their share of subsidies was roughly equivalent to their share of EU agricultural output.

Ireland and Greece on the other hand received a share of subsidies that was much larger than their share of EU agricultural output - twice as large in Ireland's case. The subsidies they received amounted to about 1.5% of gross national income, compared to an EU average of 0.5%. The new member states began receiving CAP subsidies in 2004, but at only 25% of the rate they are paid to the older member states. However, this rate is slowly rising and will reach equality in 2013. Poland, with 2.5m farmers, is likely then to be a significant recipient of funds.

Most of the CAP money goes to the biggest farmers - large agribusinesses and hereditary landowners.

The sugar company Tate and Lyle was the biggest recipient of CAP funds in the UK in 2005, raking in £127m (186m euro). It has been calculated that 80% of the funds go to just 20% of EU farmers, while at the other end of the scale, 40% of farmers share just 8% of the funds.

How is the money spent?

Until 1992, most of the CAP budget was spent on price support: farmers were guaranteed a minimum price for their crop - and the more they produced, the bigger the subsidy they received.

The rest was spent on export subsidies - compensation for traders who sold agricultural goods to foreign buyers for less than the price paid to European farmers. But in 1992 the EU began to dismantle the price support system, reducing guaranteed prices and compensating farmers with a "direct payment" less closely related to levels of production. Cereal farmers were obliged to take a proportion of their land out of cultivation in the "set-aside" programme.

In 1995, the EU also started paying rural development aid, designed to diversify the rural economy and make farms more competitive. Additional reforms in 2003 and 2004 further "decoupled" subsidies from production levels and linked payments to food safety, animal welfare, and environmental standards.

However, three areas - sugar, wine, fruit and vegetables - have yet to be reformed. Further reform of the dairy sector is planned for the period after 2014.

Rural development funding, which currently accounts for about 13% of the total agriculture budget, is set to increase to 25% before the end of the decade.

In international trade negotiations, the EU has offered to cut all export subsidies, as long as other countries do so too. Big cuts in import tariffs are also being discussed.

Who gets what?

The crops initially supported by the CAP reflected the climates of the six founding members (France, Germany, Italy and the Benelux countries).

Cereals, beef/veal and dairy products still account for the lion's share of CAP funding, but the southern enlargements of the 1980s brought new crops into the system. Cotton farmers received 873m euros in 2003, tobacco farmers got 960m euros, and silkworm producers 400,000 euros.

Payments to olive farmers in 2003 (at 2.3bn euros) were larger than those to fruit and vegetable farmers (1.5bn euros), sugar producers (1.3bn euros) or wine producers (1.2bn euros).

Producers of milk and sugar are subject to quotas, which they must not exceed. Wine is a special case: the EU provides funds to convert surpluses into brandy or fuel - a process known as crisis distillation - and payments to replace poor quality with high quality vines.

Who benefits from all of this?

Critics argue that the CAP costs too much and benefits relatively few people.

BUDGET PRIORITIES (2005)

Only 5% of EU citizens - 10 million people - work in agriculture, and the sector generates just 1.6% of EU GDP. Supporters of the CAP say it guarantees the survival of rural communities - where more than half of EU citizens live - and preserves the traditional appearance of the countryside.

They add that most developed countries provide financial support to farmers, and that without a common policy some EU countries would provide more than others, leading to pressure for trade barriers to be reintroduced. The importance of farming to the national economy varies from one EU country to another. In Poland, 18% of the population works in agriculture, compared with less than 2% in the UK and Belgium. In Greece, agriculture accounts for more than 5% of GDP, whereas in Sweden the figure is just 0.6%. The number of people working on farms roughly halved in the 15 older EU member states between 1980 and 2003. About 2% of farmers leave the industry every year across the EU, though falls of more than 8% were registered between 2002 and 2003 in the Czech Republic, Hungary, Poland, Slovenia, Slovakia and the UK. At the same time, the average age of farmers is rising. In 2000, more than half of individual farmers in the 15 countries that then made up the EU were aged 55 or over. Farmers and their employees often work very long hours for little money. Many farms would be

The ‘mountains’ are starting to fall

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