EU rural development policy in the new member states: promoting multifunctionality?

TL;DR: In this paper, the authors identify the rural development policy choices made by the eight central and eastern European NMS and develop a taxonomy to ascertain the extent to which the NMS are directing public funds to promote multifunctionality.

About: This article is published in Journal of Rural Studies.The article was published on 2007-10-01 and is currently open access. It has received 70 citations till now. The article focuses on the topics: European union & Common Agricultural Policy.

Summary

1. Introduction

• The Common Agricultural Policy (CAP) has, since 1992, undergone enormous change.
• The instruments of price support have, for most commodities, been replaced progressively with direct payments that distort prices and trade much less.
• Thus the CAP has been re-focused, although spending has been maintained.
• Section 2 introduces the concept of multifunctionality and explores its place in recent work on the implementation of rural development policies in the EU.
• Section 3 draws on this concept to introduce the application of this concept in the NMS and establish the taxonomic framework and statistical tools used in the rest of the paper.

2. CAP reform and the concept of multifunctionality

• Since 1992, the CAP has undergone enormous change, in two distinct ways.
• As countries reduce trade-distorting support, they may introduce new instruments to maintain the output of welfare-increasing non-commodity outputs.
• The present paper thus highlights the positive-normative debate as a key area of contention in the ongoing debate over the meaning of multifunctionality.
• Indeed, whilst the OECD may wish to avoid considering “the functions and objectives assigned to agriculture by society…[t]his is…the core of the European debate on multifunctionality.”.
• Given these competing views on multifunctionality, it is interesting to consider the findings of some of the early studies conducted to examine how countries have implemented rural development from the available menu of measures.

3. Multifunctionality and the New Member States: a framework for analysis

• The new EU member states (NMS) have, since 2004, faced a rural development policy menu essentially the same as the EU15, but with some extra measures added to address specific issues in these countries (as discussed below).
• To focus analysis, rural development policy measures are divided into two groups: those principally competitiveness-oriented (‘C’ policies) and those principally multifunctionality-oriented (‘M’ policies).
• Whilst the positive approach to multifunctionality recognises commodity and noncommodity outputs, the normative approach allows us to divide M measures further, into those having implications for the efficiency of resource-use in the production of non-commodity outputs (such as diversification) and those which do not primarily target efficiency.
• Of more direct relevance to the present paper, the focus on the previous and current programming periods requires recognition of the fact that, until 2007, LEADER is treated differently in the EU15 and NMS, as explained later.
• Moreover, because the authors are not offering correlation coefficients as a formal method of hypothesis testing, they are not dismissing other, political or policy, factors that will doubtless also influence policy take-up.

4. SAPARD: Policy Choices Prior to EU Accession4

• The Special Accession Programme for Agriculture and Rural Development was established in 19995, with the express aims (Article 1(2)) of: “(a) contributing to the implementation of the acquis communautaire concerning the common agricultural policy and related policies; (b) solving propriety and specific problems for the sustainable adaptation of the agricultural sector and rural areas in the applicant countries.”.
• Figure 1 confirms the applicants respected this.
• ‘Investment in holdings’, a measure that can “improve the efficiency of agriculture” was utilised in all countries, but only three countries employed ‘land improvement and reparcelling’ (and only the Czech Republic did so to a significant degree), whilst no country pursued the ‘establishment and updating of land registers’, which would have further aided restructuring.

5. Implementing rural development policy as full members, 2004-2006

• The post-accession structure of rural development policies is rather complex.
• For the NMS thirty one measures (see Table 2) exist across several Regulations, twenty seven of which apply to the EU25.
• Measure ‘w’, “management of integrated rural development strategies by local partners”, is not applicable in the NMS as such.
• Four measures were introduced specifically for the NMS via the Act of Accession (two more measures, ‘complements to state aid in Malta’ (af) and ‘full-time farmers in Malta’ (ag), are excluded from this paper).
• Money assigned to the third measure, ‘technical assistance’, is incorporated into Figure 2 by splitting the figure between C and M sub-totals in proportion to the ratio of these two sub-totals (based on measures ‘a’-‘ac’).

5.2. Single Programming Documents and Operational Programmes: ‘Guidance’

• The EAGGF Guidance Section contributes less than half of total rural development funding in the NMS, but it is channelled into the majority of measures.
• This has been driven by Polish policy choices: pre-accession, this was the second most well-funded measure adopted whereas, post-accession, the public funds Poland directed to this measure were down by over 90%.
• In contrast to SAPARD, the post-accession programmes provide separate infrastructure support through ‘investments in farms’, ‘processing and marketing of agricultural products’, ‘water management’, etc. Moreover, Poland chose to fund post-accession investment in rural infrastructure principally using European Regional Development Fund money, via the Integrated Regional Development OP.
• Across the Guidance Section-funded programmes, countries have chosen very different combinations of measures.
• Two measures are taken up by only two countries10, three are taken up by just one country,11 whilst three more12 are pursued by no country.

5.3. Overview of post-accession policy implementation

• The orientation of the different programming documents towards either M or C measures reflects the emphasis of the underlying legislation.
• Article 43(2) of Regulation 1257/1999, the basis for RDPs states, in the first indent, that member states shall in their RDPs “provide for agri-environment measures throughout their territories and in accordance with their specific needs”.
• The second indent adds that the member states must “ensure the necessary balance is kept between the different support measures”.
• Utilising the quintile-based classification outlined in Section 3, the broad policy orientation by country and by programme can now be identified.
• The countries are ranked in the same order as that shown in Figure 4 and confirm more formally the findings described previously.

6. Analysis of results and policy implications

• The foregoing discussion confirms broad alignment between the C or M focus of different legislation and policy uptake in the NMS.
• The results presented here are thus offered as a first, partial, analysis of rural development policy choice in the NMS, to be used as a guide to more detailed research, investigating policy choice at a more detailed, disaggregated level (as, for example, Bertoni et al do, as noted earlier).
• It may thus be assumed that a higher percentage share for agriculture indicates a less developed sector, suggesting a relatively high demand for C measures at the expense of multifunctionality.
• That said, the results show the signs on the coefficients are as expected for the RDPs and for total post-accession funding, although only those associated with RDP measures are significant (at 5%).
• Applying their analytical framework to their dataset, six countries adopt a balanced approach (from Belgium, with 48% of funds assigned to M measures, through France, Luxembourg, the Netherlands and Spain to Greece, with a 57% allocation), three countries exhibit a moderate M preference (Denmark, Italy and Germany), with the rest revealing a strong M preference .

7. Conclusions

• Recent CAP reforms have extended the scope of policy goals and instruments and introduced to the policy a new two-Pillar structure.
• The classification of rural development measures as either competitiveness-oriented (C) or multifunctionality-oriented (M) is rooted in the literature on multifunctionality and in the approach taken by the European Commission.
• Postaccession, however, five of the eight countries pursued a balanced adoption of M and C measures, two countries showed a moderate M-preference, whilst Poland showed a moderate C-preference.
• In order to seek to understand further the policy choices of the NMS, correlations were calculated between M spending shares and selected economic variables, overall and for individual programmes.
• That said, the analysis presented here should not be interpreted as constituting formal hypothesis testing.

Figures

Figure 1: Take-up of Competitiveness-Oriented and Multifunctionality-Oriented Policy Measures under SAPARD (shares of public funding)

Figure 4: Take-up of Competitiveness-Oriented and Multifunctionality-Oriented Policy Measures under ALL Post-Accession Policies (shares of public funding)

Table 3: The Evolution of the New Member States’ Policy Preferences (Public Funds)

Table 1: SAPARD Policy Options Available to Applicant Countries

Figure 2: Take-up of Competitiveness-Oriented and Multifunctionality-Oriented Policy Measures under RDPs (shares of public funding)

Table 4: Correlation Coefficients (r) for Policy Uptake, public funding

Table 2: Rural Development Policy Measures, Document Type and Policy Orientation

Figure 3: Take-up of Competitiveness-Oriented and Multifunctionality-Oriented Policy Measures under OPs and SPDs (shares of public funding)

Frequently asked questions

Q1. What are the contributions in "Eu rural development policy in the new member states:" ?

This paper identifies the rural development policy choices made by the eight central and eastern European NMS and develops a taxonomy to ascertain the extent to which the NMS are directing public funds to promote multifunctionality. 

Q2. What is the effect of smaller farms on the balance of the C/M mix?

To the extent that smaller holdings are associated with lower efficiency, it can be expected that countries with smaller average farm sizes have a greater need for C measures over M measures. 

Q3. What is the effect of land use on the balance of demand for C and M measures?

As for agricultural employment levels, they may be presumed to be negatively linked to spending on M measures, since a higher share of the total population engaged in agriculture is likely to be aligned with low sectoral efficiency and thus a greater need for targeted (and principally C-oriented) adjustment. 

Q4. What are the main factors that are not considered in this paper?

Potential cross-measure influences on take-up are not considered in this paper, for example measure accessibility (determined, inter alia, by national co-financing rates)and, for post-accession choices, previous implementation experience. 

Q5. What is the effect of legislative constraints on measure accessibility?

Given strict legislative limits on, for example, co-financing rates, a study of measure accessibility may be relevant to an analysis of the take-up of different measures within a country (noting that co-financing rates vary across measures), but these legislative constraints limit measure-accessibility as a factor allowing significant variation in cross-country take-up rates for a given measure. 

Q6. What is the relative importance of M measures in the CAP?

however, that because rural development funds represent about 10% of CAP spending in the EU15 but about 40% in the NMS, the relative importance of M measures across the CAP as a whole is greater in the NMS than the EU15. 

Q7. What is the purpose of the Special Accession Programme for Agriculture and Rural Development?

The Special Accession Programme for Agriculture and Rural Development was established in 19995, with the express aims (Article 1(2)) of:“(a) contributing to the implementation of the acquis communautaire concerning the common agricultural policy and related policies; (b) solving propriety and specific problems for the sustainable adaptation of the agricultural sector and rural areas in the applicant countries. 

Q8. What is the definition of ‘negatively’ oriented measures?

M-oriented measures can thus be defined ‘negatively’ as all measures other than those which seek primarily to raise the efficiency with which resources are used to produce commodity outputs. 

Q9. What is the link between a country’s economic development preferences and the share of public rural?

A link may be expected with a country’s rural development preferences, if lower levels of economic development are associated with larger and less efficient agricultural sectors which may, in turn, result in a greater demand/need for C-oriented funding. 

Q10. What are the main reasons for the broadening of the CAP?

Trade-related concerns have been highly influential in this ongoing reform process (see, inter alia, Swinbank and Daugbjerg, 2006), with other factors also helping change the CAP in a second way, with the CAP now embracing a wider range of goals and instruments. 

Q11. How much is the equivalent coefficient on public spending through all post-accession documents and programmes?

The equivalent coefficient on public spending through all post-accession documents and programmes is -0.6095, just below the critical value for 10% significance.