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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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Both investigated countries have chosen the simplified system in order to grant their farmers the CAP direct payments during a limited period in the form of a decoupled area payment, expressed in €/ha. The minimum size of eligible area per holding for which payments may be requested corresponds to 0.3ha. However, Poland has decided to set the minimum size at a higher level, which is 1ha (MRiRW/ARiMR 2003).

These considerations suggest that the distribution of the assigned EU-funds to different agri-food areas has been shaped by their relevance to the national economy. The different allocation results between the investigated countries also provides empirical evidence that economic and political power are interrelated: In Poland, agricultural interests were represented by political parties. Besides agriculture, these parties also act for the rural population, and thus, this group is relatively well-represented in the political decisionmaking process. On the contrary, in the Czech Republic there is a close relation between political decision-makers and well-organized agricultural producer groups. Thus, agricultural producers are expected to benefit more from the negotiation agreement than other groups.

4.2 Payments related to animal production Some of the negotiation issues are presented in Table 4. When comparing the figures for

requests and results, the usual pattern of the negotiation process could be observed:

converging with the position of the negotiating partner. However, the EU-proposal is much closer in terms of the negotiation result than are the respective country-specific requests.

Thus, the commitment to be undertaken by the accession countries seems to be larger than were the concessions of the EU.

An interesting result appears while comparing the relation between the requests and the results and the levels of actual agricultural production. Table 4 shows that the requests of both countries were, on average, one-third higher than animal production in 2001. This high discrepancy can only be partly explained by the incentive of extracting as much as possible from the EU-budget. Rather, the difference has to be seen as a consequence of the ongoing consolidation process of agricultural production. After the beginning of liberalization and restructuring, the countries experienced a drastic drop of farm output.

Combined with the milk sector, beef is an area where the CEECs have seen the most significant reductions during the 1990s. Only in recent years has a significant trend towards the full utilization of animal production capacities been observed. Taking the example of the number of cattle stock, the production level in 2000-02 refers to 45% in the Czech Republic and 60% in Poland while comparing the production level from 1989-92.

The persistent difference between current agricultural production and output that began in the late 1980s is an indicator that the build up of animal production is not yet finished. In principle, it can be assumed that when the negotiated result is larger than agricultural production, the effects of the consolidation processes were accepted by the EU Commission. For the Czech Republic, this is the case for almost all products except sheep.

However, a very diversified picture results for Poland. Continued interaction and technical meetings during negotiations between Poland and the EU have allowed compromises to be worked out among themselves. The reconciliation process has lead to negotiated agreements strongly different from those originally-proposed. In many cases, the final negotiated results are even lower than the EU-proposals. For example, while Poland is expected to increase its milk production during the next years, it must also decrease its livestock significantly.

–  –  –

The negotiation results reflect the particular circumstances of the agricultural sectors in both countries. In section 2.2, we have provided some detailed information about the reason why the countries have enjoyed various levels of success regarding income transfers to animal production. The higher importance of animal production in the Czech Republic than in Poland can only partly explain the different results in a political economy context.

The comparatively better negotiation results, especially in the beef sector, could be explained by the Czech Republic having a much better agricultural structure than Poland, and hence the possibility to organize interest groups and to transfer the producer requests to the decision-makers.

5 Conclusions When exploring the successes and failures of the CEEC regarding the EU accession, different external and internal restrictions, which the EU and the acceding countries had to face during the negotiation process, should be considered. The most important external restriction limiting the scope of action concerns compliance with the WTO-rules. For example, the EU has to move from market support towards a policy enhancing rural development. Furthermore, the decision process of the EU was strongly dominated by internal considerations regarding EU-budget and the principle of unanimity by decisionmaking. At the same time, the realms of party politics at the domestic level were rarely free of EU issues. The agrarian interest groups and lobbyists in the established EU-members acquired greater bargaining power in the multilateral framework than did those in the CEECs. However, because of the necessary acceptance of the majority of the national population (referenda), the interest groups in the CEECs could not have been neglected during the negotiations. In Poland, agricultural interest were represented by political parties. Besides agriculture, these parties also act for the rural population, and thus, this group has been relatively well-represented in the political decision-making process. The high fragmentation and low specialization of the Polish beef and milk producers has caused these producers to have only limited influence on the decision-making process. On the contrary, in the Czech Republic there is a close relation between political decisionmakers and agricultural producer groups. Moreover, agriculture is characterized by large holdings with advanced specialization. Therefore, agricultural producers have greater bargaining power and benefited more from the negotiation agreements than other groups in the Czech Republic.

In summary, the different national patterns (agriculture, interest groups) have determined the shape of the negotiation results in agriculture and structural policies. Accordingly, supporting rural development has gained important budgetary components in Poland, whereas in the Czech Republic the assistance of agricultural production dominates the planned budgetary expenditure. The different allocation results of the EU-commitments among the agri-food areas within the investigated countries also provides empirical evidence that economic and political power are interrelated.

Due to closed negotiations, all acceding countries will benefit from EU integration in terms of net position. The efforts of CEECs to influence the policy direction of the EU can be seen as an example of the attractive power that a large regional organization can have.

Furthermore, there is empirical evidence that within that group, the poor countries receive relatively more net transfers than the richer ones, which is a common principle in the EU.

These findings confirms our opinion that no country would be able to negotiate special arrangements which would raise it above the level of the others. Nevertheless, although the net position of the acceding countries tend to be positive in the very first years of EUmembership, they will be treated differently than the members in the current EU. An asymmetry between financial obligations and rights relating to only a partial integration in the CAP (i.e., direct payment) will cause much lower net transfers than those to the poorest countries in the EU-15. In this context, the negotiation success of the CEECs could be questioned.

The CAP led to over-production of dairy and meat products. These surpluses are dumped on world markets using costly export subsidies. The new EU-members were originally expected to absorb the overproduction of the EU-15. This policy direction shaped the negotiating strategy of the EU-15 regarding production limits, in particular for milk. At the same time, the milk sector is of major importance for most of the CEECs and the single most important commodity contributing to agricultural income. Consequently, production quotas were the most difficult negotiation issues between Poland, as well as the Czech Republic, and the EU.

With regard to the negotiation results, both countries still have space to expand the production of most agricultural goods. Thus, rising consumer incomes, and following, an over-proportional demand increase are expected to lead, over the next few years, to a position where all applicant countries may become net importers of animal products. All candidate countries as a group were net exporters of milk products in the 1990s. Within that group, Poland was also the main net exporter of beef. It is expected that after EUaccession, Poland especially will become a net importer of both product groups in the medium-term. The Czech Republic will probably remain a net exporter with regard to milk products, though exports will follow a declining trend. Moreover, high external tariffs will restrict imports of the new EU-members to those from the old EU countries. From this point of view, the advantages of integration with the CAP are relatively low for both investigated countries.

The milk and beef markets belong to the most highly-regulated in the EU. Since the financial support level of the producers in those sectors is much higher than in the acceding countries, the new EU-members can expect a stabilization of the beef and milk production and an improvement of incomes in those sectors. However, the settled production limits will induce further structural changes towards further consolidation, and hence to market exit of small and inefficient farms. This is more likely to be the case in Poland than in the Czech Republic. Nevertheless, much of the future direction of structural change, especially in Poland, is less dependent on milk/beef market policies than on the economic and social developments in rural areas. High unemployment and poverty are very likely to hamper structural change in the milk and beef sectors, even if the CAP will provide incentives to market production. Thus, allocating the great part of the assigned EU-funds to the measures supporting rural development actions should have been seen as an appropriate political decision in Poland.

6 References BMVEL (2002): Statistisches Jahrbuch über Ernährung, Landwirtschaft und Forsten der Bundesrepublik Deutschland, 46. Jgg., Landwirtschaftsverlag, Münster-Hiltrup.

CR (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal.

CR (EC) No 1255/1999 of 17 May 1999 on the common organisation of the market in milk and milk products.

CR (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations.

CSU (2002): Statistical yearbook of the Czech Republic.

EC, DG Agriculture (2002): Prospects for agricultural markets 2002 – 2009 [http://europa.eu.int/comm/agriculture/publi/caprep/prospects2002/fullrep.pdf].

EU (2003 a): Financial framework for enlargement 2004-2006 - Indicative allocation of Commitment and payment appropriations. Copenhagen Package [http://europa.eu.int/comm/budget/pdf/financialfrwk/copenhagen_package/webtablesE N.pdf; Stand: September 2003].

EU (2003b): Treaty of Accession: Negotiations on Accession by the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia to the European Union; Brussels, 3 April 2003.

Euroskop (2003): Position of main non-governmental agricultural and food organisations of the Czech Republic, 2002; Chapter 7: Zemedelstvi.

GUS (2002): Statistical Yearbook of the Republic of Poland.

GUS (2003): Polish agricultural census 2002 [http://www.stat.gov.pl/, Stand: Oct. 2003] Mayhew, A. (2003): The Financial and Budgetary Impact of Enlargement and Accession.

SEI Working Paper No. 65.

Ministry of Agriculture of the Czech Republic (2002): “Green Report”. Report on the state of agriculture of the Czech Republic in 2001.

MRiRW/ARiMR (2003), Polish Ministry of Agriculture and Rural Development, Agency for Restructuring and Modernization of Agriculture (2003), „Polskie Rolnictwo w UE, Wydanie specjalne”, Biuletyn Informacyjny, No. 1-2, 2003, Warszawa.

MSZ (1999): Ministerstwo Spraw Zagranicznych, Stanowisko negocjacyjne Polski w obszarze Rolnictwo [Poland’s negotiation position in the area of agriculture].

OECD (2002) : Agricultural policies in OECD countries. Monitoring and Evaluation 2002.

SAEPR/FAPA (2002): Analiza i ocena propozycji Komisji Europejskiej z 30 stycznia 2002 r. dla krajow kandydujacych, Warsaw.

Seremek-Bulge, J., (2003): Polski rynek mleka w pierwszych latach po akcesji do Uni Europejskiej [Prospects of the Polish dairy market after the EU accession], IERiGZ, Komunikaty, Raporty, Expertyzy, No. 486.

Stigler, G.J., (1971): The Theory of Economic Regulation. Bell Journal of Economics and Management Science, 2:137-46.

ZMP (2003): Agrarmärkte in Zahlen: Europäische Union. Tier- und Pflanzenproduktion, Bonn.

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