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«Dr. M. Bavorova, Dr. H. Hockmann, Dr. A. Pieniadz Institute of Agricultural Development in Central and Eastern Europe; Theodor-Lieser Str., 06108 ...»

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The agricultural interest groups in Poland were organized poorly and their collective action was hardly possible. Since groups whose interests were concentrated would have been better able to influence government than groups whose interests were diffuse (Stigler 1971), it is obvious that the lobbyist and (producer) organizations could not really be influential during the negotiation process. Indeed, the political positions were mainly based on sector analysis7 provided by a group of experts from Poland, the EU and the World Bank, and the position documents of national political parties.

2.2.2 The role of interest groups in the Czech Republic In the Czech Republic, there has not been any solidly agrarian political party during the transition period. Agricultural interests are generally represented by different producer groups, most of which are associates in the Agrarian Chamber, established in September 1993 by parliamentary act No. 301/1992 for the sake of increasing the social participation in Czech agriculture. Because of its legal status, its position differentiates it from other interest groups, which arose on a voluntary basis. The function of the Chamber as an informant of the government was very important in the pre-accession phase. Since the interests of the Chamber and the state were similar (implementation of the CAP), cooperation was well-developed. One indicator for this was the participation of the Agrarian Chamber on the elaboration of position document for the Chapter on Agriculture.

The position of the Agricultural Chamber was strengthened after the Czech Social Democratic Party, who has similar views on agriculture as the Chamber, won the election in 1998. The chair of the Agriculture Association, which is a member of the Agrarian Chamber, became Minister of Agriculture.

The above considerations suggest that agrarian interest groups played a relevant role during the negotiation process by influencing public opinion and the decisions of policymakers in both investigated countries. However, whereas in Poland the agricultural interests have been represented by political parties, in the Czech Republic, agrarian interest groups have played a crucial role. Thus, differences in agricultural and structural policies and measures, and hence in the allocation of budgetary expenditure could be expected.

Despite some conflicts regarding agriculture and rural policy between different interest groups and parties in Poland, all of them shared common concerns relating the well-being of rural areas. Consequently, during the negotiations more weight was put on assisting rural development than on agriculture. On the contrary, in the Czech Republic, supporting The PSL should have had a greater influence on the negotiation results than SO, since the chairman of the PSL was a member of the negotiations committee. The chairman of SO was an observer during the negotiations.

The first strategic paper was prepared as early as in 1990 in Poland.

agricultural production, i.e., in the form of market-related measures, (expenditure) was the key aspect of its policy direction during the negotiations.

In order to understand the different policy directions, and consequently the negotiation results, we have first to compare the features of the agricultural sectors in the investigated countries.

2.2.3 The relevance of the agricultural sector In Poland, as well as in the Czech Republic, agriculture has only a relatively small share on GDP. However, employment in agriculture and the share of rural population is much more pronounced in Poland than in the Czech Republic (s. Table 1). In fact, the high occupation in Polish agriculture reflects a high latent unemployment, which is expected to be revealed after the EU-accession. The rising unemployment in rural areas is likely to remain an economic pressure and to continue to be an important policy challenge in Poland. These figures provide a first explanation of the differences in policy direction between the investigated countries.

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In 2002, there were 935,000 farm holdings engaged in cattle production in Poland; 84% of them owned between 1-9 cattle, whereas only 1% of the holdings had stocks greater than 50 cattle.8 According to structural features, the average farm size is the lowest in Poland when compared to all other acceding countries. Larger stocks can be found in Polish coFor example, the corresponding figures for Germany are 17% and 43%, respectively. The average holding size corresponds to 67 cattle in Germany, whereas an average farm in Poland holds 1.9 cattle (GUS 2003, BMVEL 2002).

operatives, farms leased from the state, or in a few, specialized private enterprises.

However, the share of cattle held by those legal persons is still very low and corresponds to 6%. The greatest part of the cattle stock (94%) is held by private family-based farms (natural person). In Polish milk production, almost 100% of the milk cows are kept by peasant milk holdings. This agricultural structure causes considerable organizational problems not only for the efficiency and productivity of the agri-food chain, but also for the diffusion of information from the producer to the decision-makers. Poland will only be competitive in the extended EU if it goes through intense structural change towards larger farms. This would only be possible when agricultural labor demand increases, which in turn would require a higher accentuation of rural policies in comparison to structurepreserving income transfers to agriculture.

On the contrary, in the Czech Republic large-scale farms dominate. The ownership forms in the Czech agriculture are also diametric different: 80% of the cattle stock belong to different legal entities, whereas almost half of them are held in agricultural co-operatives.

The trend towards larger and fewer farms in the Czech Republic means that the consolidated producers can gain additional articulation power, and hence better influence political decisions.

One consequence of the structural features is that, in general, the support level of agriculture as expressed in PSE, is slightly higher in the Czech Republic than in Poland.

Furthermore, in Poland beef production is not supported, but taxed. This is an indicator that beef production is not only of minor importance for Poland’s agriculture, but also that the producers have difficulties organizing themselves. In fact, beef production is often a by-product of milk production. Low specialization and high structural fragmentation cause Polish beef producers to have only limited influence on agricultural groups. On the contrary, Czech agriculture is characterized by large holdings with an advanced specialization. Thus, it can be expected that milk and beef processor interest groups have been formed and work effectively in political decision-making processes.

3 The Copenhagen agreement: General financial issues The accession negotiations between the EU and six applicant countries, among others Poland and the Czech Republic, started on 31 March 1998, and were closed in December

2002. The whole process could be divided in two parts: (1) screening tasks involved in adopting the acquis communautaire, and (2) negotiations. The screening process began in April 1998. For this purpose, the acquis communautaire was divided into 31 chapters.

After the screening period, each applicant country had to draw up its position on each of those chapters to engage in negotiations.

In June 2003, EU Finance Commissioner Schreyer presented a first draft of the EU household 2004. According to estimates, the total budget should increase, despite the enlargement in May 2004, by only 3.3% compared to the previous year. The maximum appropriations for agriculture for the new members from 2004-2006 should be 9,792 Mill.

Euro. 47% of the appropriations are expected to be allocated to Poland and 11% to the Czech Republic.

Table 2 provides an overview about the expected net position of the new EU-members from 2004-2006. A first observation is that net financial transfers to all accession countries are positive. Thus, the initial concerns of some countries, especially the Czech Republic, of becoming net payers were accounted for in the negotiations process. The EU responded to these concerns by allowing for compensation payments which are intended to guarantee that the net position of the new members will be positive during the transitional period.

In order to get a more accurate view on the negotiation results, we compared the net transfers in relation to GDP. The figures show that there is a strong negative correlation between per capita income and net transfers in percent of GDP. Thus, similar to the existing EU, the poor countries receive relatively more than the richer ones. Furthermore, the numbers confirm our expectation that no country would be able to negotiate special arrangements which would raise it above the level of the other accession countries.

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However, it is still unsure whether some countries could absorb all of the theoreticallyavailable resources, especially during the very first years of membership. Thus, it is very likely that the true payments will be much lower regarding different (infra)structural constrains of the individual countries.

4 Payments to agriculture

4.1 General considerations In December 1999, Poland and the Czech Republic submitted a position document on chapter “Agriculture” to the European Commission, which includes country-specific expectations regarding the conditions of their EU membership. In June 2000, the Common Position of the EU followed.9 Some very important and difficult negotiation issues between Poland, as well as the Czech Republic and the EU, concerned direct payments, production quotas and premiums for animal husbandry and slaughtering, as well regulations during the transitional period until 2006. There were many sessions and technical meetings held in order to solve problems which arose during the negotiations; the final reconciliation of interests came on 13 December 2002 in Copenhagen.

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Agriculture negotiations with the accession countries took place based on the existing CAP rules. One of the main interests of the EU was establishing production quotas and subsidy entitlements so as to avoid market surpluses in the extended EU-25. Hence, the quotas proposed by the EU lay much below the countries'requests, especially in the case of the Polish milk quota.

Figure 1 shows the components of the purely agricultural expenditure provided to the investigated countries. Due to national priorities, the applicant countries were given some flexibility in allocating the assigned funds to different agri-food areas. Poland has disposed of approximately 48% of them to rural development and 52% to market-related payments (market measures, direct payments). The corresponding figures for the Czech Republic are 37% and 63%, respectively. Since the Polish national priorities are to improve the market efficiency of the agri-food sector and the conditions for economic activities and job creation, it is not surprising that the majority of the agricultural payments has also been assigned to rural development measures. These measures will be funded by the EAGGF Guarantee Section10 and include support for early retirement, less-favored areas, agrienvironment and afforestation. Certain rural development measures have been adapted or created in order to better reflect the requirements of the new member states in the first years of accession (2004-2006). For example, there is support for semi-subsistence farms undergoing restructuring11, as well as specific measures to assist farmers in meeting EU standards (CR (EC) No. 1257/1999; EU 2003, chapter IXa).

Figure 1: EU financial assistance provided to Poland and the Czech Republic for agriculture (in %)

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Source: EU (2003 a).

Further financial support of agriculture will be possibly through a partial integration of the CEEC farmers into the direct payment system of the Community. The calculation of the direct area payments in the new EU members follows the principle of the EU-15. Hence, it is based on the average base area and yield, and thus regionally differentiated. In the new EU members, the regional base areas have been established as the average number of hectares within a region, down to arable crops during the three-year period of 1997-2001.

Consequently, in the Czech Republic, the national base areas correspond to about 2.25 million ha and reference yields to 4.20 t per hectare. The corresponding figures for Poland are 9.45 million ha and 3.00 t/ha.

Direct payments will start, however, at a lower level than in the EU-15: at 25% in 2004, 30% in 2005 and 35% in 2006, and thereafter increase by 10 percentage points each year to European Agricultural Guidance and Guarantee Fund (EAGGF).

"Semi-subsistence farms" mean farms which primarily produce for their own consumption, but also market a proportion of their output. The amount for that specific measure in the new Member States shall correspond to a maximum of 1,000 Euro per farm/per year, and a maximum of 1,250 in the case of Poland (EU 2003b).

reach 100% of the applicable EU-level by 2013 (EU 2003b). As a consequence of that regulation, many of the farmers in the new members states are afraid of distortions of competition resulting from different support levels between regions.

Additionally, complementary to direct payments funded under EAGGF, as a temporary and specially-tailored provision, support may be granted to farmers eligible for

complementary national direct payments or aid during the 2004-2006 period only (2004:

36%; 2005: 39%; 2006: 42%). Furthermore, new EU members have the possibility of complementing direct payments with national means. However, the overall support granted to a farmer in all acceding countries is generally restricted to 55%, 60% and 65% of the EU level, respectively.

The EU has provided candidate countries with the opportunity of selecting between the simplified and the standard system of direct payments as applicable in the current EU.

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