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Much remains to be done to improve competitiveness of agriculture in candidate countries, independent study says

European Commission - IP/01/1536   06/11/2001

Other available languages: FR DE

IP/01/1536

Brussels, 6 November 2001

Much remains to be done to improve competitiveness of agriculture in candidate countries, independent study says

The restructuring of agriculture is a major challenge for candidate countries in Central and Eastern Europe (CEECs). Although the picture varies from country to country, most CEECs are struggling to compete with the EU-15 and the restructuring process is far from over, according to a study released by the Directorate General for Agriculture today. In the medium term after accession, the study does not consider it possible to maintain two different sets of agricultural policies for new and old members. According to the report, the key question is therefore how to achieve a successful transition towards full application of the Common Agricultural Policy (CAP) in the CEECs. Immediate introduction of full direct income payments would not be appropriate, at least in a transition phase. They would consolidate current dualistic structures without ensuring the investment and restructuring necessary to improve the competitiveness of CEEC agriculture to EU-15 levels.

According to the study, most CEECs are struggling to compete with the EU-15 in spite of their tariff protection and less constraining quality and health norms. The CEECs generally make a far less productive use of land and labour than in the EU. This is largely due to much lower investment, fragmented structures and less intensive production methods. It is also due to very inefficient feed conversion (roughly half of the EU level).

Following transition, CEEC agriculture has become increasingly polarised between large holdings and semi-subsistence farming. The low profitability of the sector has consolidated this process. Further brakes on restructuring towards more intensive European type farms have come from the role of agriculture in absorbing excess labour ("hidden unemployment") and difficulties in accessing capital. Hidden unemployment creates political and social pressures in employment intensive sectors such as dairy, beef and pigmeat. The pressures to restructure the agricultural sector in the single market will expose this hidden unemployment particularly in semi-subsistence and former co-operative farms.

In the medium term after accession, the author does not consider it possible to maintain two different sets of policies towards new and old members. The key question for him is therefore how to achieve a successful transition towards full application of the CAP in the CEECs. Immediate introduction of full direct income payments would not be appropriate, at least in a transition phase. They would consolidate current dualistic structures without ensuring the investment and restructuring necessary to improve the competitiveness of CEEC agriculture to EU-15 levels.

For the author, policies targeted on restructuring and the reduction of hidden employment in the CEECs is the key to agricultural recovery. This would require relatively long transitional periods to carry out the economic and social adaptation of the sector. Such an approach would include strengthening aid for restructuring of the commercial sector, the progressive introduction of direct aids in order to avoid major destabilisation, a broad set of policies aimed at managing the rural exodus and a social safety net for semi-subsistence agriculture.

The study on "trends in competitiveness and incomes in CEEC agriculture" by Professor Alain Pouliquen of INRA, France, draws on a range of data sources previously unavailable including structural data, sectoral economic accounts and farm accountancy data for Poland, Hungary and the Czech Republic. This has allowed the author to look in much greater detail at the important questions of competitiveness and incomes than was previously possible.

The full report is available on DG Agriculture's website under:

http://ec.europa.eu/agriculture/publi/reports/ceeccomp/index_en.htm


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