Slovene Agriculture and European Union

Prof. Dr. Emil Erjavec,Negotiation Team for the EU Accession of Slovenia

University of Ljubljana,

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

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

• economiceconomic accession effects accession effects

1. What could CAP really bring to the Slovene farmers?1. What could CAP really bring to the Slovene farmers?

2. With whom, how and when we have negotiations?2. With whom, how and when we have negotiations?

3. Are all candidates the same? How they should be

threated?

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

5

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

0

2

4

6

8

10

12

14

GR IRL P DK FIN E NL I F S GB A B D L SLO

6

Share of agriculture in less favoured areas

AA (ha) LU

Source: SORS

25%

75%

33%67%

7

Farm size (ha UAA / farm, 1997)

Source: SORS

47,9

18,918,3

5,5

0102030405060

Holdings 10+ Holdings total

EU12- 93 SLO 91 SLO 97

8

Self-Sufficiency in % (1997/98)

Source: KIS 0 100

Eggs

Poultrymeat

Pigmeat

Beefmeat

Milk

Hops

Fruit (inc. citrus)

Vegetables

Sugar

Other cereals

Maize

Wheat

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.

10

Market Price Policy Adjustment

1991/92 1996/97 2000/01

Foreign trademeasures

Duties duties,special levistariff quotas

duties,special levistariff quotas

Admnistrativeprices andregulations

Wheat, oil, sugar,milk, …

Wheat, sugar,milk

/

Interventions oninternal market

/ temporaryinterventionbuyings

introduction ofcom. interventionmeasures

Supply manage-ment measures

/ / /

Direct payments input subsidies input subsidiespremiumsprice aids

direct payments

Three pillars of adjustment and implementation capacity upgrading domestic agric.policy

Comparable legal systemLaw 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

Agricultural budget (mio €)

29,2 33,563,4 57,3

30,936,0

33,2 42,621,021,4

23,8 21,543,0

46,5

51,2 58,4

14,5

0

20

40

60

80

100

120

140

160

180

200

1992 1993 1994 1995 1996 1997 1998 1999 2000

Other ministry

Implentations costs, forestry, fisheryAgricultural services Rural development measuresMarket-prices policy

13

Aggregate Producer Prices and Revenues Levels in Slovenia, 1993-2000 (index EU=100)

Source: SORS, EUROSTAT, KIS

0102030405060708090

100110120

1993 1994 1995 1996 1997 1998 1999 2000

Prices

Budg. support

Revenues

14

Producer prices and revenues in Slovenia, 2000 (index EU=100)

Source: SORS, EUROSTAT, KIS

0

20

40

60

80

100

120

140

160

180

Wheat Mais Barley Sugarbeett

Milk Beef Pork Poultry Eggs Sheep

Prices Revenues prihodka

Producer Support as % of gross farm receipts

-60

-40

-20

0

20

40

60

1992 1993 1994 1995 1996 1997 1998 1999p 2000e

Slovenia OECD European UnionHungary Poland RomaniaBulgaria

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

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

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

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

Analysis of the accession effects- methods -

The estimation were made by agricultural sector model APAS

in combination with Policy Analysis Matrix PAM

APAS Framework

Own-Cross PricesInput PricesPolicyTheoreticalRestrictionsDeflatorLand Constraint

Own-Cross PricesInput PricesTechnologyPolicyDeflator

Area or Herd Yield

Production

Own-Cross PricesIncomePolicyDeflatorPopulationWaste and OtherUses

Demand

Trade

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)

Accession scenarios

Denotation Description

BS Baseline scenario – continuation of national agric.policy from2000

EU+++ Complete CAP adoption in accordance with Agenda 2000,expected producer price level, direct payments and whole packageof rural development measures

EU+-o Equal as EU+-+, but without direct payments and with thereduction in the rural development payments

EU--o Equal as EU+-o but lower producer price levels (competitivness)

The impact of different budgetary treatments by the EU?

The impact of the competitivness of the agro-food sector?

Budgetary implications ( mio €)

0

100

200

300

EU+++ EU--o

Dir. Paym. LFA Paym.

A-Env. Paym. Rur.-Devp. Paym.

(Incentive) Price Projection (BS = 100)

60 80 100 120

Wheat

Maize

Barley

Sugar beet

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

EU+++ EU+-o EU--o

Producer Price

40 60 80 100 120 140

Wheat

Maize

Barley

Sugar beet

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

EU+++ EU+-o EU--o

Incentive Price

Supply & Demand (BS = 100)

90 100 110

Wheat

Maize

Barley

Sugar

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

EU+++ EU+-o EU--o

Demand

70 80 90 100 110 120

Wheat

Maize

Barley

Sugar

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

EU+++ EU+-o EU--o

Supply

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

-250 -200 -150 -100 -50 0 50 100

Wheat

Maize

Barley

Sugar

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

BS EU+++ EU+-o EU--o

Net trade

30 50 70 90 110 130

Wheat

Maize

Barley

Sugar

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

BS EU+++ EU+-o EU--o

Self-sufficiency

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

-100,000 0 100,000 200,000

Wheat

Maize

Barley

Sugar beet

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

BS EU+++ EU+-o EU--o

Net Income

60 80 100 120

Wheat

Maize

Barley

Sugar beet

Milk

Beef

Pork

Poultry

Eggs

Sheep meat

BS EU+++ EU+-o EU--o

Rentability

Agricultural Income (BS = 100)

40 60 80 100 120 140

BS 2000

BS

EU+++

EU+-o

EU--o

BS = 100

30

Conclusions: Farm income will probably decrease after accession.

The level of decrease depends: on negotiated CAPthe level and efficiency of domestic reforms and the competitiveness of the agro-food

sectorProduction 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 distortionsto 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 1. What could CAP really bring to the Slovene farmers?farmers?

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 2. With whom, how and when we have negotiations?negotiations?

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:

renationalisationtransitional paymentsmore attentions to the second pillar

3. Are all candidates the same? How they should be threated?