International diffusion of gains from biotechnology and the European Union's Common Agricultural Policy

This paper analyses the impact of adopting or rejecting genetically modified (GM) crops in the European Union, taking into account the EU Common Agricultural Policy (CAP). In this paper the productivity impact of genetically modified organisms (GMOs) differs across crops, taking factor biased technology change into account. The transfer of knowledge across countries is modelled as a process of endogenous knowledge spill-overs. Analysis with a multi-region applied general equilibrium model shows that the CAP protects farm income and production despite non-adoption of the more productive GM crops in the EU. The EU will forgo substantial benefits in terms of economic welfare if it bans GM imports.     

CAP Subsidies and Productivity of the EU Farms

The paper investigates the impact of the Common Agricultural Policy (CAP) subsidies on farm total factor productivity (TFP) in the European Union (EU). We employ a structural semi‐parametric estimation algorithm directly incorporating the effect of subsidies into a model of unobserved productivity. We empirically study the effects using the Farm Accountancy Data Network (FADN) samples for the EU‐15 countries. Our main findings are clear: subsidies impact negatively on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity is more nuanced and in several countries it turned positive.     

Should ‘Impartial’ Advice be a Priority of European Agricultural and Rural Policies?

Recent EU legislation will require Member States to ensure that farm advice which is supported by EU funding is impartial. In this article we present the findings of an online workshop which asked whether this should be a priority for European advisory supports within the Common Agricultural Policy. The answer was ‘no’. At the workshop, results of AgriLink were presented for discussion with international experts. These results highlighted major pitfalls for setting the boundaries of independent advice. Participants from Europe and North America agreed that ‘impartial’ advisors providing or selling only advice are rare in many contexts. Key organisations offering farm advice in many European countries, such as farmers’ cooperatives, often have established relationships with commercial suppliers. Being apparently independent from industry is also not sufficient for ensuring that advice addresses societal issues. Farmers’ choice for advice is more likely to reflect established trusted relationships than the ‘impartiality’ of the advisor. Workshop participants instead argued that policies should focus on increasing transparency (revealing vested interests); investing in ‘back office’ activities to ensure that advisors have access to reliable and relevant evidence; and ensuring that the full range of EU farmers have access to professional advice.     

Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty

The size of the insurance and wealth effects of a change in the Common Agricultural Policy (CAP) for arable crops is estimated. The impact of price uncertainty is accounted for in the specific decision-making structure of the European Union (EU) arable crop producers under nonlinear mean-variance risk preferences. A system of output supply, input demand, and land allocation equations is estimated on a sample of Italian specialized arable crop farms. The simulation of the impact of the recent reforms confirms that farmers' output responses are consistently affected by the size of the insurance and wealth effects.     

Measuring the Trade Restrictiveness of Domestic Support using the EU Common Agricultural Policy as an Example

We develop an index that measures the overall trade effects of domestic support payments. Our index is based on the Mercantilist Trade Restrictiveness Index (MTRI) and is capable of analysing the development of the trade restrictiveness of domestic support payments over time and across countries. It facilitates the evaluation of agricultural policy reforms introducing changes in the composition of domestic support payments. We conduct this analysis with a computable general equilibrium model that is extended to depict detailed agricultural policies using the Common Agricultural Policy of the European Union (EU) as an example. For the representation of agricultural policies, we updated the underlying database by incorporating detailed EU domestic support payments taken from the OECD Producer Support Estimate (PSE) tables and reconcile PSE data with the WTO classification scheme. Our index confirms a decrease in trade distortion stemming from the implementation of decoupled support in the EU. In addition, the trade-equivalent protection rate shows that the trade restrictiveness of domestic support payments depends on the assumptions made with regard to the degree of decoupling of those payments.     

The trade distorting effects of export refunds: The case of beef exports to Africa

The usual sale of European agricultural products to Africa using export refunds has been heavily discussed in recent decades. At the centre of the discussion are the consequences on the agricultural producers in Western and Southern Africa. There are two different points of view: On the one hand, the European Union's (EU) export policy reduces the prices on these markets and relieves high burdens on local producers; on the other hand are claims that refunds do not influence local prices significantly. Hence, the Common Agricultural Policy (CAP) has no effect on markets of third countries, besides depressing world market prices. This paper focuses on the effects of EU's export subsidies for beef exports on its market share in several developing countries. Twenty-seven African countries were analysed using a fixed-effects model between 1988 and 2000. The results clearly show a highly significant positive impact of the export refund rate on the market and the import share. With its export policy, the EU raises its market position and edges out other competitors.     

Regional Growth and Policies in the European Union: Does the Common Agricultural Policy Have a Counter-Treatment Effect?

This article investigates the impact of both the Common Agricultural Policy and structural policies on European regions by estimating a conditional growth convergence model. The Common Agricultural Policy influences the convergence process by affecting regional aggregate productivity, eventually conflicting with the structural policies designed to promote growth in lagging regions. The conditional convergence model is specified in a dynamic panel data form and applied to 206 regions observed from 1989 to 2000. A GMM estimation is applied in order to obtain consistent estimates of both the convergence parameter β and the impact of the conditioning variables, policy measures in particular.     

Standing at the Crossroads – the Future of a Strong Common Agricultural Policy is at Stake A la croisée des chemins – l’avenir d’une politique agricole commune forte est en jeu Am Scheideweg – die Zukunft einer starken Gemeinsamen Agrarpolitik steht auf dem Spiel

Standing at the Crossroads – the Future of a Strong Common Agricultural Policy is at Stake The issues and targets in the European Union’s agenda are largely in line with Hungarian objectives; job creation for example is one of the main targets of the Europe 2020 strategy and also of the Hungarian Government. Hungary’s development and competitiveness are linked to the internal development and global competitiveness of the European Union; and so our primary objective is to strengthen the integration process and to obtain a strong Common Agricultural Policy. The CAP has reached the highest level of integration among EU policies and its original objectives have been reinforced by the Lisbon Treaty. Europe needs a strong and common agricultural policy beyond 2013; the main task of agriculture will be to ensure the security of food supplies. The future success of the CAP requires appropriate financial support to secure future targets. Rural development has already become an integral part of the CAP structure; but rural areas will not be viable without an evolving agriculture. Without the provision of a proper level of income subsidies many farms would be forced to stop production. CAP adjustments should promote the catching up of new Member States and eliminate the current system of direct subsidies that disadvantage the new members.     

An indicator to reflect the mitigating effect of Common Agricultural Policy on soil erosion

This study presents the updated version of the recently published LANDUM model [Land Use Policy 48, 38–50 (2015)]. LANDUM is integrated into the 100 m resolution RUSLE-based pan-European soil erosion risk modelling platform of the European Commission. It estimates the effects of local land use and management practices on the magnitude of soil erosion across each NUTS2 region of the European Union. This is done based on a spatially explicit estimation of the so-called cover-management factor of (R)USLE family models which is also known as C-factor. In this updated version, the data on soil conservation measures (i.e., reduced tillage, cover crops and plant residues) reported in the latest EU Farm Structure Survey (2016) were integrated and elaborated in LANDUM in order to estimate the changes of the C-factor in Europe between 2010 and 2016. For 2016, a C-factor of 0.2316 for the arable land of the 28 Member States of the European Union was estimated. This implies an overall decrease of C-factor of ca. -0.84 % compared to the 2010 survey. The change in C-factor from 2010 to 2016 could be an indication for the effectiveness of Common Agricultural Policy (CAP) soil conservation measures in reducing soil erosion in Europe, especially key CAP policies such as Good Agricultural and Environmental Conditions and Greening.     

The Role of the Common Agricultural Policy in Enhancing Farm Income: A Dynamic Panel Analysis Accounting for Farm Size in Italy

As a multi-objective policy, the EU Common Agricultural Policy continues to secure significant income support for farmers as one of the nine specific objectives. We estimate the income transfer efficiency of a broad set of pivotal policy measures, focusing on the effects of farm structure on income transfer efficiency. We use dynamic modelling, based on a micro-data panel of Italian farms for the period 2008–2014, allowing for endogeneity, simultaneity bias, and omitted variables. In line with previous studies and economic expectations, we find that decoupled direct payments provide the highest contribution to agricultural incomes, followed by agri-environmental payments and on-farm investment subsidies. Coupled payments have no significant impacts on farmers’ income. Generally, for all analysed Common Agricultural Policy measures, large farms benefit from greater transfer efficiency levels compared with medium and small farms. These differences among instruments and across farms suggest that policy-participation costs may play a pivotal role, together with the economic structure of farms, in determining the income transfer efficiency of CAP policies.     

Levelling the playing field for European Union agriculture: Does the Common Agricultural Policy impact homogeneously on farm productivity and efficiency?

Originally conceived as a post-war policy vehicle for ensuring agricultural self-sufficiency, the Common Agricultural Policy (CAP) has evolved into a multifunctional instrument designed to satisfy a diverse portfolio of European Union (EU) policy objectives including nature protection. Notwithstanding, whilst the CAP has become more environmental and socially responsible, it is still expected to deliver an efficient farm production system capable of competing on world markets. The current paper combines a farm business panel dataset for 98 EU territories with a Stochastic Frontier Analysis (SFA) approach, to assess the impact of four contemporary broad categories of CAP subsidy programs on efficiency and environmental sustainability. In accordance with the literature, this study more correctly defines inputs as “facilitating”, whilst following recent methodological developments, crop-subsidies are treated as an endogenous strategic variable in the production function. Comparing between two discrete time periods, further tests are conducted to examine the hypothesis of technical efficiency convergence across european territories. The results suggest that first pillar crop subsidies and pillar two environmental programs generate a disincentive effect on productivity, whilst in general, the CAP promotes technical efficiency convergence within Europe.     

CAP and Advisory Services: From Farm Advisory Systems to Innovation Support

Farm advisory services have become an important topic in the Common Agricultural Policy (CAP) of the European Union (EU). The aim of this article is to draw lessons from the implementation of the regulation and measures of the current 2014–2022 CAP in knowledge transfer and advisory services to contribute to debates about the future of farm advisory policies. Findings are based on two studies commissioned by the European Commission: an evaluation study implemented by a consortium of consultancies and researchers and a comparative analysis implemented in the frame of the H2020 research project AgriLink. The article first provides a historical perspective of the ‘knowledge and advice’ dimension of the CAP since 2007. We show a gradual transition towards greater flexibility of measures supporting innovation and knowledge flows. The professional status of farm advisors across European countries was more strongly acknowledged, offering new life-long training opportunities to advisors. However, the implementation of CAP’s advisory measures remains complex. As a result, the effects of these measures have been rather limited, with only few farmers reached overall. Fostering an inclusiveness of these measures remains an ongoing challenge for policymakers.     

Does EU rural expenditure correspond to regional development needs?

The EU offers a complex system of rural development interventions as part of its Common Agricultural Policy. A Common Monitoring and Evaluation Framework (CMEF) has been developed for the programming period 2007–2013 in response to challenges faced with the evaluation of rural development measures in earlier programming periods.Statistical and multivariate analysis of CMEF baseline (regional characteristics) and input (expenditure) indicator data at the NUTS2 subdivision level is used to compare four typical expenditure allocation patterns (Competitiveness, Environment, Rural Viability, Equal Spending) in terms of associated regional characteristics and development trends.The results suggest expenditure priorities are generally in line with regional needs and that there are some positive development trends, for example higher increase of agricultural labour productivity in the Competitiveness Group, while for environmental topics the level of data required remains unsatisfactory for trend assessment. 17% of the regions have a budget allocation pattern deviating from other regions with similar characteristics, which could indicate ineffective priority setting. Consistent CMEF data over multiple programming periods would be desirable to support the relationships found and to facilitate time series analysis, but this seems questionable given that the European Commission has discontinued the CMEF in 2014 with further adaptations for the 2014–2020 programming period underway.     

Book Reviews

Book reviewed in this article: Tangermann, S. and Banse M, (eds) 2000. Central and Eastern European Agriculture in an Expanding European Union Antle, J. M. and Smith, V.H. (eds) 1999. The Economics of World Wheat Markets, CABI Publishing Johnson, R. W. M., with a commentary by R. Howarth. (2001). reforming EU Farm Policy: Lessons from New Zealand Grant, Wyn P. and Keller, John T. S. (eds). Agricultural Policy: Volume I – Agricultural Policy in Western Europe; Volume II – Agricultural Policy in Global Perspective OECD Agricultural Outlook 2005–2005     

The CAP for Turkey? Potential Market Effects and Budgetary Implications

EU accession negotiations with Turkey are scheduled to start in October 2005. The period of accession negotiations will probably last for ten years or longer, but the effects of applying the Common Agricultural Policy (CAP) to Turkey are currently a controversial discussion in the EU. Effects of Turkish accession on EU agricultural markets are likely to be small. The EU would gain additional export opportunities for cereals and animal products. On the other hand, Turkish agricultural exports to the EU are projected to increase for only a few fruit and vegetable products. EU budgetary outlays for the application of the CAP to Turkey could total between £3.5 and £6.3 billion in 2015 – depending on whether direct payments are phased in or not – and £5.4 billion in 2025. Most of these outlays would be for direct payments to agricultural producers and that may not be in Turkey's best interest. This is because direct payments tend to be capitalized in land prices and may thus inhibit the necessary process of improving the Turkish agricultural structure. Transfers under the second pillar of the CAP may hold more interest for Turkey, because they can be targeted at improving productivity and thereby income. Projected outlays for the CAP take a backseat to projected transfers to Turkey under the structural policy of the EU.     

Investing in Bulgarian Agriculture Investir dans l’agriculture bulgare Investitionen in die bulgarische Landwirtschaft

Investing in Bulgarian Agriculture The Programme for European Development of Bulgaria has set agricultural development as a basis for economic growth. The first strategic objective of the Programme is to make agriculture an attractive industry and to guarantee a high standard of living for people working in the sector by stabilising and increasing their incomes. The priorities of the Bulgarian government regarding agriculture follow the priorities of the Common Agricultural Policy (CAP) and we strictly adhere to the two pillars of the CAP. A Food Safety Agency is being established to guarantee the safety and increase the quality of food and a legislative base is being created to allow producers to supply directly to consumers thus enhancing market opportunities. Bulgaria is in the middle of the first programming period of the Rural Development Programme (2007–2013) and expectations of the programme are high. It has the largest budget in Bulgaria and the fund absorption rate of about 20 per cent is the highest in the country. Bulgarian government priorities are consistently focused on the goal of increasing the competitiveness of Bulgarian agriculture through technical and technological modernization of the sector and on the sustainable development and stabilization of rural areas under the conditions of EU membership.     

Understanding the determinants of investment reactions to decoupling of the Common Agricultural Policy

The objective of this paper is to identify the determinants of the reactions of farm households to the decoupling of the Common Agricultural Policy (CAP) focusing, in particular, on changes in on-farm investment behaviour. The paper analyses a sample of 248 farm-households in 8 EU countries, using a non-parametric approach based on classification tree algorithms. The factors emerging as determinants of an increase in on-farm investment as a reaction to decoupling are: specialisation, existence of a successor, the farmer's age, labour management, SFP per hectare, location and expectations. When used, country variables, tend to substitute some of the factors listed above and become the main predictors, followed by labour endowment, specialisation and expectations. While the study confirms the relevance of the main determinants available from the literature, it also emphasises the articulation (non-linearities) of the effects of farm head age, labour management and SFP per hectare on the reactions to decoupling. This hints at the need for further research on the way such factors combine in determining farm-household reactions to a changing market and policy context, and support the usefulness of non-parametric statistics tools for such types of analysis.     

The highly variable economic performance of European agriculture

The successive reforms of the Common Agricultural Policy (CAP), the enlargements of the European Union (EU) and the impacts of climate change have amplified the diversity of European agriculture. These rapid changes have resulted in the intensification of agricultural activities in some regions, while they have led to the marginalization of agriculture and its eventual abandonment in others. The objective of this paper is to investigate the factors that are behind the differential performance of agriculture across the EU-27 countries. Ward's, k-means and two-step clustering methods were used to classify European agriculture based on gross-value-added farm, land and labour productivity indicators. Significant differences were revealed between the Northern-Central counties and the continental peripheries (Mediterranean, Eastern, Northern Scandinavian). An exact logistic regression model was used to analyse the factors behind this differential performance. Agricultural sectors characterized by a young and better trained farm population are more likely to attain high economic performance. The odds to attain high economic performance are almost 9 times greater for countries with a highly trained farm population, namely, the Netherlands (72%) and Germany (69%), than for countries with poor farm training, while an ageing farm population such as in Portugal (72%) and Bulgaria (66%) is 92% less likely to be high performing. The importance of investments in agriculture was also identified. The significance of the wheat yield variable highlights the importance of both environmental conditions and technical efficiency on farm economic performance. Similarly, countries with a high share of utilized agricultural land in less favoured areas, such as in the Mediterranean, are 94% less likely to attain high economic performance. The redesign of CAP direct payments between old and new member states after 2013 combined with the impacts of agricultural trade liberalization and climate change are expected to deteriorate the position of low performing agricultural sectors further.     

Book Reviews

Book reviewed in this article:
Optimal Stockpiling of Grain by Bruce L. Gardner, Lexington Books, D.C. Heath and Company
The Common Agricultural Policy of (he European Community by Rosemary Fennell, Granada Publishing     

Impacts of Decoupled Agricultural Support on Farm Structure,Biodiversity and Landscape Mosaic: Some EU Results

The decoupling of direct payments from production represents a substantial reform of the Common Agricultural Policy (CAP). Farmers are no longer required to produce commodities to be entitled to support but only to keep land in Good Environmental and Agricultural Condition. If output declines as a result, there is concern that landscape services produced jointly with commodities will also decline. The aim of this paper is to assess the long‐term effects of the 2003 reform on farm structure, landscape mosaic and biodiversity for a sample of EU regions. Impacts are quantified using a spatial agent‐based modelling approach by simulating agricultural development with links to indicators of landscape value. Our results demonstrate that eliminating the link between support payments and production has possible negative consequences for the landscape, but only under particular circumstances. It is shown that these effects could be offset by strengthening (Pillar II) agri‐environmental schemes. Further the single payment scheme results in higher land rental prices which reduces its ability to achieve its goal of providing income security for farmers. Implications of these results for the direction of continued CAP reform are discussed.