CAP Second Pillar:From structural policies to rural

developmentLecture 15.

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 in next two lectures:– Is there a need for an EU rural development policy?– What should its objectives be?– Should it be funded by EU or national budgets?– Has RD funding been well spent?

Origins in policies to promote agricultural restructuring

• Why EU involvement?• 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” report

• 1988 Reform of the EU structural funds– Regional, Social, Guidance and Fisheries– Five objectives– 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

• Basic principles

• 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

Extended Impact Assessment of the Commission’s RDR proposal 2004

• Option 1: Improved status quo– MS free to draw up RD programmes choosing any

combination of measures from the three thematic axes.

• Option 2: A more strategic approach– Community would first outline RD priorities– Set minimum levels of spending under each Axis

• Option 3: A more territorial approach– As for Option 2, but with territorial targeting in each

policy axis– Maximum limit set on Axis 2 agricultural

competitiveness

Rural Development Policy 2007-2013

• One single rural development fund

• One single programming system

• One single set of financial rules

• One single control system

• For all rural areas in the EU

Rural Development Policy 2007-2013: Foundations

Rural Development

2007-2013

« LEADER » Axis

Axis 1 Competi-tiveness

Axis 2Environment

+Land

Management

Axis 3Economic

Divers.+

Quality of Life

Single set of programming, financing, monitoring, auditing rules

Single Rural Development Fund

Programme balance

• Competitiveness objective: total programme funding at least 10% (Commission proposal 15%)

• Environment/land management: at least 25%

• Quality of life and diversification: 10% (Commission proposed 15%)

• Leader approach: at least 5% (Commission proposed 7%)

Programming steps

• EU strategy document setting out the EU priorities for the priority axes

• National strategy plans translating the EU priorities to the member state situation and ensuring complementarity with Cohesion policy

• National or regional rural development programmes articulating the four axes through measures

Community strategic guidelines for rural development

• RDR sets out objectives and measures• Guidelines set out priorities and key actions• Six strategic guidelines, three addressed to the

thematic axes– Emphasise innovation, R&D, training,

entrepreneurship in Axis 1– Biodiversity and landscape, water and climate change

in axis 2– Capacity building for local strategy development and

support for small scale investments in Axis 3

Resources available for Pillar 2 2007-2013

• 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 spendingFinancial Perspective 2007-13

€ billion 2004 prices TOTAL

Commission proposal

Final outcome

Dec 2005

EU-15 50.2 36.7

EU-10 + 2 38.5 33.1

Total 88.7 69.8

Before compulsory modulation.

Voluntary modulation without co-funding requirement for up to 20% of direct payments agreed. Source: Agra Europe

Rural development spendingFinancial Perspective 2007-13

Million € 2006 budget

2013 proposed

Total 2007-2013

EU-15 8,000 5,167 36.7 bn

10 NMS + 2 2,902 4,890 33.1bn

Total 10,544 10,057 69.8 bn

Timetable

N (2007)

EU RD strategy proposal

EU strategy approval

Elaboration and

discussion of national strategy

National/ regional

programme preparation

Programme approval

N-2 (2005) N-1 (2006)

complementarity with other EU policies

(cohesion)

strengths and weaknesses at EU

programming at national or regional level

definition of priorities for each thematic area

core impact indicators to measure progress

core result indicators

in line with national and EU RD stategy

translation of EU priorities to national situation

Programme Implement.