One of the objectives of the Romanian agricultural strategy is the harmonization of Romanian agricultural policy with that of the European Union, that is, with the common agricultural policy. The success of the convergence process will be influenced mainly by economic evolutions both in Romania and in its relations with the EU. It is, therefore, necessary to analyze the compatibility and convergence of Romania’s agricultural policy with the European Union’s.agricultural policy, integration, competitiveness, reform

Florin Buhociu

Florina Virlanuta

Liliana Moga

English

Research Papers in Economics

THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
This paper was recommended for publication by Prof. Ion IONITA, PhD 
 
 
 
THE CONVERGENCE OF ROMANIAN AGRICULTURAL POLICY  
WITH THAT OF THE EUROPEAN UNION 
 
 
Florin Marian BUHOCIU 
Florina VIRLANUTA 
Liliana MOGA 
 
 
“Dunarea de Jos” University, Galati 
florin.buhociu@ugal.ro 
florinaoana27@yahoo.com 
liliana.moga@gmail.com  
 
 
One of the objectives of the Romanian agricultural strategy is the harmonization 
of Romanian agricultural policy with that of the European Union, that is, with 
the common agricultural policy. The success of the convergence process will be 
influenced mainly by economic evolutions both in Romania and in its relations 
with the EU. It is, therefore, necessary to analyze the compatibility and 
convergence of Romania’s agricultural policy with the European Union’s.  
 
Key words: agricultural policy, integration, competitiveness, reform. 
 
 
1.  Introduction 
The Romanian agricultural strategy implies 
the harmonization of Romanian agricultural 
policy with that of the European Union, in 
the context of sustainable development. The 
success of the convergence process will be 
influenced both by economic evolutions in 
Romania and by its relations with the EU. It 
is, therefore, necessary to analyze the 
compatibility and convergence of Romania’s 
agricultural policy with the European 
Union’s.  
 
According to the “differentiation” concept 
developed at Helsinki, each country is treated 
separately in the negotiations, the degree of 
readiness to adhere to the European Union 
being appreciated in accordance with the 
merits of each one. Yet, as with previous 
adherences, the EU also takes into 
consideration the progress registered in 
parallel negotiations with other candidate 
countries, because it is more worthwhile for 
those involved that more countries adhere to 
the block than to have a series of individual 
adherences. The last round of the negotiation 
process for the expansion of the EU to 
include candidate countries in Central and 
Eastern Europe includes sensitive chapters 
that touch upon the fundamental interests of 
both the EU and candidate countries, and 
agriculture is one of these interests. 
In 1999, the European Council summoned in 
Berlin voted the document entitled “Agenda 
2000 regarding the common agricultural 
policy reform”. Agenda 2000 sets targets in 
the economic, social and environmental 
fields, rephrasing some of the objectives of 
the common agricultural policy so that they 
be in accordance with the regulations 
imposed by the Amsterdam Treaty. These 
objectives include a greater market 
orientation, an increase in the 
competitiveness regarding the quality of 
agricultural products, the stabilization of 
agricultural incomes, the integration of 
environment concepts in the agricultural 
policy, the continuous rural development and 
the simplification and decentralization of the 
agricultural policy. 
 
These objectives are in agreement with the 
sustainable development strategy convened 
upon by the European Council at Goteborg in 
2001. Yet, among these rephrased objectives 
there are potential conflicts caused by the 
difficulty of obtaining high competitiveness 
and rural development in the context of the 
high costs for promoting the standards of 
agricultural products’ quality, for promoting 
environment solutions, etc. THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
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Agenda 2000 rejects from the beginning the 
idea of national financing for common 
agricultural policy and, on the other hand, 
disapproves of the idea of a passive attitude 
on the part of the European Commission on 
the issue of agricultural problems. 
 
2.  The objectives of the common 
agricultural policy 
Through Agenda 2000, the common 
agricultural policy sets itself the following 
fundamental objectives: 
a. the improvement of the competitiveness of 
EU agriculture by establishing market 
intervention so that producers can respond 
more efficiently to the market signals and, at 
the same time, be protected from extreme 
fluctuations in prices. To meet this objective, 
the following measures are proposed: 
  in the plant sector, a 5% intervention cost 
reduction, the elimination of the monthly 
increase of intervention cost for cereal 
and rye and the adjustment of customs 
fee so that the commercial protection 
system be in accordance with the 
international rights and obligations of the 
EU. 
  the decrease of additional costs for high 
quality wheat and the introduction of 
quality bonuses. 
  the decrease of intervention cost for rice 
down to the global cost, and the 
compensation of producers through direct 
payments. 
  in the beef sector, the simplification of 
the direct payment system by means of 
establishing a close connection between 
producer supply  and consumer demand 
for high quality products.  
b. the promotion of marketwise orientation 
and of sustainable agriculture by means of 
transferring subsidies from product to 
producer and by introducing a system of farm 
payments dissociation based on historical 
reference periods. Furthermore, the 
assistance given to producers is conditioned 
by the meeting of certain quality standards 
and by environment protection. 
 
These proposals have been made to increase 
flexibility and to simplify the way through 
which producer income stability is 
guaranteed. These measures correspond with 
the subsidy and efficiency increase principles 
of PAC, simplifying the administrative 
procedures of fund allocation and 
maintaining a relative stability of producer 
income. It is attempted to promote certain 
measures that do not distort the market and 
that, at the same time, respect consumer and 
public opinion preferences in general. 
Regarding the support given to agricultural 
producers, many commentators have noticed 
that only a few farmers beneficiate from the 
majority of direct payments allocated. 
Agenda 2000 proposes a voluntary 
mechanism, modulation, which regulates the 
reduction of compensatory payments and the 
awarding of direct help to the zones 
confronting with social issues (from rural 
development funds). 
 
This concept, modulation, regulates that all 
direct payments be reduced progressively by 
3% every year until they reach 20% per year, 
the maximum amount convened upon 
through Agenda 2000. This process 
contributes to the achievement of the fund 
allocation optimization objective, 
establishing a balance between the market 
and rural development. Small farms are more 
labor-intensive, less prosperous, and 
therefore receive a smaller part of the total 
support given to agricultural producers. 
Large farms are more capable of adapting to 
new technologies and obtaining scale 
savings. At the same time, the cost of 
workforce adjustment is larger for units with 
more workforces. Actually, the application of 
the dynamic modulation system had 
generated approximately 500-600 million 
Euros in 2005, money which was then 
invested in rural development. 
 
The future of the agricultural sector is 
indissolubly connected to the development of 
rural areas, which cover 80% of the European 
territory. The rural development policy 
completes the price and market policies of 
the European Union. Yet, the implementation 
of the rural development policy is slow, as 
only 16% of the total expenses of the 
European Fund for Orientation and 
Guarantee (EFOG) and only 10% of the 
expenses made by the European Guarantee 
Fund are being allocated to this field. The 
increase in competitiveness of rural areas and 
the creation of new income sources for 
farmers and their families, inside and outside 
the farm, remain the main objectives of the 
common agricultural policy reform.  
 
In Agenda 2000 and in the regulations that 
followed, the European Commission has 
pursued the simplification of agricultural 
legislation and of its implementation. The 
complexity of the common agricultural 
market mechanism (OPC) is discouraging 
potential farmers from choosing this THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
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profession. The Commission is pursuing a 
powerful decentralization, so that the 
decision ability is descended to the local 
level, where the problems of agricultural 
producers and those regarding rural 
development can be solved most efficiently. 
 
At the same time, it is clear that an 
agricultural policy that encourages supply 
surplus is unacceptable and inefficient in the 
long term. Agenda 2000 and subsequent 
regulations propose an additional objective of 
the common agricultural policy – budgetary 
stabilization. This implies the limitation of 
budgetary expenses below the level of those 
convened upon by the Berlin Council. As I 
mentioned earlier, one of the reform 
objectives of PAC is the transfer of 
agricultural support from product to 
producer. As part of the PAC reforms carried 
out in 1992 – 2002, the reduction of 
intervention prices and the partial 
introduction of direct payments (through 
dissociation of the production level) in the 
cereal sector, for oil-bearing plants and in the 
beef sector was pursued. The positive impact 
of these reforms in promoting marketwise 
orientation and competitiveness increase, the 
stabilization of producer income and the 
reduction of negative output concerning the 
environment is obvious. In order to maximize 
the benefits of dissociation, the Commission 
proposes the introduction of a system based 
on one income given to each farm as a direct 
payment.  
 
In addition to the benefits brought to internal 
producers (within the EU), the application of 
the direct payments system facilitates the 
harmonization of Central and Eastern 
European countries’ agricultural policies with 
the common agricultural policy. Furthermore, 
it offers a major advantage in the negotiations 
of the World Commerce Organization 
(WCO), since there is compatibility between 
the application of this instrument and the 
forms of subsidy approved in the 
negotiations. Yet, the awarding of 
compensatory payments in conditioned by 
the meeting of certain standards concerning 
quality, environment and the improvement of 
the health state and rearing conditions of 
animals. At first, this compensation scheme 
will cover all the products comprised in the 
organized common markets system, but also 
vegetables, potatoes, beef and mutton.  
In a subsequent state, this system will also 
include the milk, sugar, olive oil and fruit 
markets, as well as others. 
 
The payment awarded as income (through 
dissociation) will be established by the farm. 
The entire sum offered as income will be 
split in several parts in order to facilitate the 
partial transfer of payment should part of the 
farm be sold or rented. This system of 
payments awarded to producers entails a 
series of obligations: 
  that they prevent speculative transfers of 
titles, resulting in the payment and 
accumulation of titles inconsistent with 
the agricultural base; 
  that they ensure the rational use of the 
land in accordance with environment 
standards; 
  that they ensure that the total level of 
payments made to the producer does not 
exceed the actual level of payment 
established by the European Commission 
and awarded by EFOG; 
  that they ensure the compatibility of the 
payment system with the systems 
approved through the Green Box 
convened upon by the World 
Organization of Commerce Rounds. 
 
3. Instruments of agricultural policy and 
their effects 
 
The reform program of PAC promoted by the 
European Commission in 2002 proposes a 
series of measures that accompany the 
applied policy instruments: 
  the encouragement of farmers to 
participate in the quality increase 
program recognized by the European 
Commission, which includes origin 
names and indications regarding the 
geographic origin. The voluntary 
implication of farmers in this program is 
regulated, as well as the stimulation of 
the participants with amounts of financial 
aid awarded over a maximum period of 5 
years. 
  the offering of support to groups of 
producers in order to stimulate the 
promotion of the quality increase 
program, including origin names and 
indications regarding the geographic 
origin. 
  the offering of temporary regressive aid 
to farmers who implement the quality 
and environment standards system 
through the norms of the European 
Commission. The system regulates the 
awarding of a compensatory payment 
that should not exceed 200 Euros per 
year, over a maximum period of 5 years; 
  the offering of aid for farm audit. The 
award of compensatory payments that THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
  14 
cover the costs entailed by the financial 
activities of agricultural producers is 
proposed, in order to attain a better 
flexibility of their financial system. 
 
The effects of the PAC reforms can be 
studied on two coordinates: 
 
The economic impact 
The effect on the cereal production will be 
modest, the majority of analyses showing that 
the implementation of the direct payment 
dissociation system and the support price 
reduction will lead to a relatively small 
decrease in production; the wheat production 
will be the least affected, and the production 
of fodder cereal is predicted to increase 
rapidly. The effect of dissociation on the 
zootechnic sector will lead to a decrease in 
beef and mutton production, will generate an 
increase in market prices, with positive 
effects on the incomes of producers in this 
field. 
 
Table No. 1 Predicted expenses of EU-25 and the effects of the PAC reform 
Million Euros 
 
Year  2006  2007  2008  2009  2010  2011  2012  2013 
Limit  UE-25  4530  45759 46217 46679 47146 47617 48093 48574 
Expenses  UE-25  44395 45156 46123 47568 48159 48805 49451 50099 
Out of which 
UE-15 
41746 42183 42802 43569 43513 43513 43513 43513 
Candidate 
countries-10 
2649 2973 3321 3999 4646 5292 5938 6586 
Difference 911  603  94  -889  -1013  -1188  -1358  -1525 
  228  751  2030 2420 2810 3200 2243  Savings through 
the PAC reform, 
out of which 
available for 
rural 
development 
  228 475 741 988 1234  1481  1481 
 
The budgetary impact  
The integration of Central and Eastern 
European countries in the EU will lead to an 
increase in budgetary expenses (table no.1). 
For EU-15, the proposed measures lead to 
budgetary savings of 337 million Euros for 
final year 2006 and approximately 186 
million Euros in 2010. For Central and 
Eastern European states pursuing integration 
in the EU, the Union’s budget will bear 
additional expenses of 88 million Euros in 
2007, expenses which will grow annually, 
reaching 241 million Euros in 2013. 
 
Conclusions 
Considering the facts mentioned above, 
Romania’s agricultural policy, in the context 
of its integration in the EU and of its 
increasing participation on the international 
markets, should head towards: 
a) the orientation of the agricultural policy’s 
strategic objectives towards the creation and 
development of competitive markets 
upstream the branch for agro-alimentary 
products (downstream industries); 
b) the relaunch of the investment process 
through the promotion of nondiscriminatory 
policies that offer all agricultural producers 
equal access to available budgetary resources 
and to medium- and long-term loans on 
strictly competitive grounds. 
c) the formation and implementation of a 
policy for the integrated development of rural 
communities, as a premises for the 
concentration of land capital and for its 
exploitation in competitive and viable 
agricultural units. 
 
Bibliography: 
  Gavrilescu D., Giurca, D – „Agro-
alimentary Economics”, 2
nd edition, 
Expert Publishing House, Bucuresti 2001 
  Socol Cristian – „Options of agricultural 
policy and sustainable development in 
agriculture”, Economica Publishing 
House, 2004 
  Vincze M. – „Agricultural Policies in the 
world”, „Presa Universitara Clujeana” 
Publishing House, 2000 
  *** European Commission, The Periodic 
Report over the progress registered by 
Romania  for its adherence to the EU 
2004, Bruxelles, October, 2004  
 

nd edition, Expert Publishing House,

The Convergence of Romanian Agricultural Policy with that of the European Union

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The Convergence of Romanian Agricultural Policy with that of the European Union

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