CAP UNDER FIRE: THE BUDGETARY REVIEW AND THE CAP

During the process of the budgetary review the CAP faces its greatest challenge of its history: not only the (common) financing of the CAP, but the future of the CAP itself is at stake. It is obvious that the reform steps implemented so far – even though they have several forward-looking elements – do not result in a CAP sustainable on the long run. Further changes are inevitable. Basing our analysis on the theories of fiscal federalism and other political economy approaches, we try to answer the following questions. Is common financing of a reformed CAP justified? Can national co-financing be extended? Is it justified to keep the system of commonly financed direct payments?European Union, Common Agricultural Policy, fiscal federalism, budget review, Agricultural and Food Policy, F15, F36, H41, H50, Q18,

Transformational Crisis, Transformational Depression, The Changing Agriculture The Hungarian Case

Using the expression transformational crisis invented by János Kornai and used for the whole national economy the paper intends to define the common characteristics of this transformational crisis evolved in the countries concerned. Besides the paper tries to define and interpret this expression in sector approach just as to further develop it in consideration of agriculture. The eastern enlargement of the EU is considered to be different from the former enlargements when it came to the accession of countries with comparatively consolidated agricultural structure and increasing agricultural output. In Hungary the very source of possible difficulties is to be seeked in the transformational depression. Due to the transformational depression the EU-adaptation led to difficulties in the short run and could lead to difficulties in the long run.transformational crisis, transformational depression, EU-adaptation in the agricultural sector, Agricultural and Food Policy,

Community versus National Financing - How to achieve a sustainable agricultural policy?

Is the Common Agricultural Policy unsustainable? Is agricultural spending a major distorting factor in the EU economy and an obstacle to the implementation of the Lisbon agenda? To answer these complex questions, detailed analysis is required along the following lines of thought: 1. Exploration of factors justifying Community level intervention. – Is the ’theory of decentralization’ applicable to budgetary issues and the common agricultural policy? Our hypothesis suggests that it is. 2. Assessing CAP as it currently exists, including its ability to generate public goods at the level of the Community (multifunctional elements which are indeed cross-border externalities) and its ability to create added value at the level of the Community. 3. Making an attempt to redefine the Community’s agricultural policy by identifying goals which can be achieved more effectively at the supranational level rather than by involving secondary levels of decision making. – Making an attempt to outline a Common Rural Policy, a new policy intended to promote the creation of public goods required by the society by means of targeted and decoupled economic policy measures. The concept of the new policy – a new policy requiring both national and Community funding – is in line with the requirements of sustainable development, i.e. sustainable agricultural activities such as sustainable land use, food and feed production, biofuels, forestry and fishing. Additionally, the new policy we outlined may also be an effective approach to meeting challenges arising from globalisation, trade liberalization, climate change and structural reform issues. ----------------------------------------- Fenntarthatatlan a Közös Agrárpolitika? Torzítják a mezÅ‘gazdasági kiadások az EU gazdaságá¬nak fejlÅ‘dését, gátolják a Lisszaboni stratégia végrehajtását? Ezekre a bonyolult kérdésekre a követ¬kezÅ‘ pontok részletes elemzésével adhatjuk meg a választ: 1. A közösségi szintű beavatkozást igazoló tényezÅ‘k feltárása, rendszerezése. – Alkalmazható a „decentralizációs elmélet†a költségvetési kérdések, illetve a közös agrárpolitika vonatkozásában? Hipotézisünk szerint: igen. 2. A KAP értékelése – figyelembe véve az EU-szintű közjavak (a multifunkcionális elemek va-lóban határokon átnyúló externalitások) és EU-szintű hozzáadott érték előállítására vonatkozó képességet. 3. Kísérlet az EU agrárpolitikájának átalakítására annak segítségével, hogy felmérjük, mely cél-kitűzések valósíthatóak meg eredményesebben szupranacionális szinten, és nem pedig másodla¬gos döntési szintek bevonásával. – Kísérlet a Közös Vidékpolitika körvonalazására, amely új poli¬tika célzott és szétválasztott szakpolitikai intézkedések segítségével járul hozzá a társadalom által megkívánt közjavak előállításához. Az új politika koncepciója – annak az új politikának a koncepciója, amely mind nemzeti mind Kö¬zösségi szintű finanszírozást is igényel – összhangban van a fenntartható fejlÅ‘dés – azaz a fenntart¬ható mezÅ‘gazdasági tevékenységek: fenntartható földhasználat, élelmiszer- és takarmány-előál¬lítás, bioüzemanyag, erdészet és halászat – követelményeivel. Továbbá az általunk felvázolt új po¬litika megfelelÅ‘en kezelheti a globalizációval, kereskedelem-liberalizációval, klímaváltozással és strukturális reformmal kapcsolatos kihívásokat.public goods, fiscal federalism, new agricultural policy, közjavak, fiskális föderalizmus, új agrárpolitika, Agricultural and Food Policy, Agricultural Finance,

CAP Reform in the Light of the WTO Doha Round Negotiations

Our paper focuses on the question: how the measures of June 2003 agreement can help the EU to meet the new WTO commitments. As decoupling of direct payments and WTO classification of the new payments seem to be one of the most important questions from the point of view of WTO negotiations, our analysis focuses mainly on the Single Farm Payment (SFP). We assesses the decoupled nature of the single farm payment (SFP) based on WTO and OECD criteria. We conclude that the SFP meets not only the current WTO (design based) criteria of decoupling, but can also be qualified as effective fully decoupled system using the OECD terminology.CAP reform, WTO, decoupling, International Relations/Trade, Q17, Q18, F13, F15,

Factors Determining EU-Competitiveness of the Hungarian Agriculture: Trade policy approach

As regards EU accession of Hungary one of the most important questions is how the adaptation of the Common Agricultural Policy (CAP) will affect the competitiveness of the Hungarian agriculture. Competitive effects of CAP can be revealed in several ways (quantitative, comparative analysis, simulations etc.) but the results may differ significantly. That is why it is interesting to compare the results of different methods. This paper concentrates on the competitive effects of changing trade policy by comparing the results of comparative analyses (producer prices, export subsidy systems and import protection) and simulations. The results of the simulation confirm the conclusion that the CAP adaptation will favour basically the cereal production. CAP adaptation will intensify the already existing (competitive) differences between the two large sectors of agriculture (plant and animal products). All of the analyses came to the conclusion that the prospects of arable crops are favourable. Less reassuring are the prospects of animal products. There are apparent efficiency problems, and rising feed costs (due to accession) may further weaken the position of this sector. Without basic structural reforms the sustainability of the sector's competitiveness is questionable.EU accession, trade policy, competitiveness, International Relations/Trade,

Declining "Common" Agricultural Policy? CAP Reform of 2003 and Its National Implementation in the Member States

This paper focuses on the basic element of the 2003 CAP reform process: on the single farm payment and its national implementation models. We examine possible economic impacts (production distorting effects, redistribution, restructuring, resource allocation and effects on land market) of the basic SFP models. In sum, we can say that the 2003 CAP reform and the new support provide an opportunity to overcome some of the difficulties the CAP faces with. However, the wide range of national diversities threatens the principle of the single market, and transparency and operation of the common market organizations. As there is a wide range of possible constructions member states can decide for, the common nature of the CAP gets more and more questionable.CAP reform, decoupling, single farm payment, Agricultural and Food Policy, Q17, Q18, F13, F15,

CAP versus Rural Policy Challenges, Paradigm change

Rural development in the European Union has to face several challenges. Negative effects of old and new challenges (if these challenges are not faced effectively) might enhance and accelerate those processes that are taking place slowly for the present but that are definitely irreversible. On the basis of sector-specific approach problems related to agriculture should be focused on. It has to be, however, highlighted that there is an ongoing paradigm change: there is a shift from the agricultural policy aiming at food self sufficiency and income parity towards a sustainable rural policy with spatial focus. The shift itself is considered a continuous challenge, too. The following questions as objectives of the paper arise: - Are there policy instruments that could accelerate the paradigm change, enhance the spread of ―new rural economies‖? - What is the relation between the priorities of the rural development in the European Union and the spatial (or territorial) approach? - Is there a way to create such an agricultural policy which itself is able to face more effectively the new rural challenges? - At which level should be found the solutions to problems including finding the necessary financial resources – national or Community level? In what way could be reallocated the necessary resources of an integrated rural policy? The paper intends to analyze and systematize the challenges facing the rural economy/rural development both from the point of view of sectoral and territorial approach. It is aimed at analyzing and assessing adequate policy instruments and justified financial tools which could strengthen the integrated rural policy. The authors apply the theory of new rural paradigm, new rural economy, the concept of multifunctional agriculture, European added value and common rural policy.common agricultural policy, new rural paradigm, European added value, Agricultural and Food Policy, Community/Rural/Urban Development, Q01, Q18, Q28, Q57,

How Decoupled Is the European Union's Single Farm Payment?

Our paper focuses on the key element of the 2003 CAP reform: on the single farm payment (SFP). The basic aim was to decouple direct payment from production decisions. Because of the widespread agricultural policy reforms (support producers with the least possible distortions) and of the on-going WTO negotiations, this is an issue attracting significant attention on behalf of agricultural economists. Different tools and different methodologies have been employed in the effort to better understand and rank policy measures in terms of their production and trade effects. Most of the literature classifies measures based on implementation criteria. Our paper assesses the decoupled nature of the single farm payment (SFP) based on WTO and OECD criteria. The EU argues that the payments do not distort trade and therefore should be placed in the WTO green box as a decoupled income support. Based on our analysis, this seems to be possible, as the SFP meets not only the current WTO (design based) criteria of decoupling, but can also be qualified as effective fully decoupled system using the OECD terminology.CAP reform, WTO, decoupling, Agricultural and Food Policy, Q17, Q18, F13, F15,

COMMON FINANCING FOR AGRICULTURAL POLICY BUDGETARY QUESTIONS

Can we agree fully with the statement, that “agricultural spending is a major distorting factor in the EU economy and a distinct obstacle to the Lisbon agenda’s implementation”? (Gros, 2008) Is it without question that Europe’s agriculture is in position to become sustainable and competitive without certain kind of common policy with no Community financing? Is it unambiguous in every respect, that the challenges facing the sector – globalization, trade liberalization, climate change, water management, Lisbon process, enlargement, changing preferences – could be answered at national level utilizing exclusively national financial sources? The answers to these questions are complex. So the purpose of the paper is multiple: - Exploration of factors justifying community level intervention. – Could be applied the bottom line of the “decentralization theorem” to budgetary questions and needs of the agricultural policy? According to our hypothesis the answer is considered yes. - Assessing present CAP - taking into account its ability to provide EU wide public goods (multifunctional elements serve in deed significant cross-border externalities) and to create EU value added. - Making an attempt to redefine EU’s agricultural policy through exploring objectives having a greater impact by being implemented at the supranational level and not at other secondary decision levels. – Making an attempt to outline a Common Rural Policy, a policy promoting the provision of public goods required by the society by means of targeted and decoupled economic policy measures. In order to attain the objectives of the paper we apply the theory of fiscal federalism, make analysis on EU public finances in a broader context.public goods, fiscal federalism, a new agricultural policy, Agricultural and Food Policy, Public Economics, Q14, Q18, H41,

Economic Growth and Convergence in the European Union

In the convergence programme approved by the Hungarian government in September 2006, the "overriding objective" was to promote real convergence. This paper analyses the problems surrounding real convergence, in light of the broader correlations of economic growth relying heavily on the results of econometric reviews designed to explore medium and long-term potential growth and the factors that influence it.economic growth, real convergence, econometric review