Agriculture: A Critical Accession Area
Agriculture: A Critical Accession Area
Agriculture is the most complex chapter of the accession negotiations and the one expected to raise the largest number of problems and difficult-to-handle hot issues. The single fact that almost half of the Community’s legislative material concerned makes the negotiations complicated: the regulations are extremely complex and littered with a multitude of technical details. There is yet another difficulty here, namely that agriculture is considered to be a delicate issue both by Hungary and the EU, and - in addition to the regulations having direct bearing on the sector - the political, budgetary and social implications also have to be taken into account.
The agricultural negotiations started in September 1998. The Community’s immense legislative material was reviewed in eight successive rounds, and the process took more than one year to complete. During the examination, the negotiating parties discussed the conditions for Hungarian adoption and application of each community regulatory tool, and defined the essential tasks to be performed prior to accession.
Hungary submitted its position concerning the agricultural negotiation chapter in November 1999. The document stated that Hungary undertook to apply every rule and regulatory procedure of the Common Agricultural Policy (CAP) of the European Union as of the first day of its membership. It is also stated that Hungary would establish all the conditions required for the operation of the CAP prior to the accession.
We will only request temporary exemption (from the obligation to apply community rules) in a limited number of cases and for a restricted period of time, such that this does not interfere with the CAP fundamentals, and do not influence the appropriate operation of the common internal market or the community regulatory tools. A part of our exemption requests aims at assisting Hungarian producers in establishing the conditions required for the application of the CAP, and solving specific accession-related problems. To meet the community requirements concerning the protection of farm animals or the structural design of slaughterhouses, for example, entails major investments. Some Hungarian producers will undoubtedly fail to comply with these due to their poor economic background. Were there no transitory regulations, these producers would be obliged to shut down production right on the date of accession, which would result in serious economic and social tension. Another request directly protecting the interests of our producers is to permit Hungary to disburse national subsidies to overcome unpredictable difficulties, if any, appearing in spite of the comprehensive application of community regulations. In some cases, we request the possibility to temporarily retain our own regulations that may differ from those of the EU. An example is the continued distribution and marketing of milk with a fat content of 2.8%, currently accounting for two-thirds of the Hungarian consumption. We also wish to keep some of our veterinary/sanitary requirements - more demanding than those of the EU - in force such as those concerning pig sperm and embryos.
In compliance with the principle of equal rights and obligations, Hungary expects to be eligible for every type of subsidy and preferential treatment that will be available for the agricultural economy of other EU-states at the time of our accession. This applies in particular to the direct producer subsidies, introduced in 1992 (formerly called compensation support).
We state our request to use the basis for production-limiting and subsidizing measures applicable within the CAP framework (quotas). The requested quantities reflect the actual production data over a longer historical period. They are in general greater than the production levels of the present day or the recent past. They were defined on the basis of the community regulations in force. We also took into account the medium and long-term interests of Hungarian producers, and the development opportunities of the sector.
The production-limiting measures applied within the CAP framework set long-term definitions for the structure of agricultural production. Hungarian agriculture has seen continuous structural changes since the beginning of the 1990s. The requested quotas will permit further transformation, as well as adaptation to community regulations and the needs of a common internal market. They also ensure that agriculture will fulfil its long-term role in country life, and, furthermore, that the Hungarian environmental and environmental protection objectives fully harmonizing with the EU’s principles will be achieved. It is a legitimate expectation of Hungarian producers that they should be able to contribute to meeting domestic and foreign market needs, expected to increase in the long run. The quotas permit this too.
The EU handed over its position for the agricultural negotiations in June 2000. On 14 June, the opening of the actual negotiations was officially announced. A certain part of our requests concerning transitory regulations were refused on the basis of their non-compliance with Community principles. In other cases, the requests were found to be reasonable, or additional data and arguments were requested for their evaluation and decision-making. EU representatives stressed that the basis for production-limiting measures has to be defined by taking into account the actual historical production data of a given reference period. Accordingly, a re-evaluation of the Hungarian standpoint was requested. However, the basis period was not specified, only data relative to the annual production between 1995 and 1999 were requested. The EU emphasized that Hungary would have to create all the conditions necessary for the application of community regulations. The EU asked for detailed schedules complete with deadlines for every institution and regulatory system involved. The negotiators indicated that they would continuously inspect the implementation of the development activities until our membership is approved. The EU took no position on the extension of the direct producer subsidies - the issue having the farthest-reaching political and budgetary consequences. This statement will be worked out later, subsequent to the detailed analysis of all other players.
In response to the EU negotiating position, Hungary submitted a supplementary statement in December 2000. In this document, it was mentioned that some of our exemption requests had been abandoned. In fact, we did not see a realistic chance for the enforcement of some of them, whilst in other cases, changes in community regulations or in the domestic conditions made the requests meaningless. In other cases, our requests were further clarified considering the comments made by the EU, or due to the modifications of the community regulations. We did not modify our quota requests; however, we attempted to justify their raison d’ętre by statistical data going back to the mid-1980s. We supplied detailed information about our plans aiming at the establishment of the institutional system ensuring the operation of the CAP. According to the schedules outlined, Hungary will realize all the conditions required for the application of the CAP prior to 1 January 2003.
The objective of the Republic of Hungary is to become an EU-member by 1 January 2003. One of the essential prerequisites to this is to achieve significant progress during the agricultural negotiations of 2001. According to the strategic document adopted at the Nice summit, the EU intends to commence the agricultural negotiations in the second half of 2001, with phytosanitary and veterinary issues at the top of the agenda. In view of their budgetary impact, the issue of producer subsidies will be discussed only in 2002. Being one of the best prepared candidates, Hungary envisages to make quicker progress than the pace set by the EU, and hopes to discuss and conclude the majority of the topics included in this chapter as early as 2001.
The agricultural negotiations are expected to be lengthy, complicated and difficult. The large volume of community legislation, plus the great number of technical details require the involvement of many experts. Presumably a number of technical details will need separate coordination. However, the real difficulty is the considerable gap between the standpoints of the parties regarding the general and detailed issues of agricultural accession.
The Hungarian objective is to achieve the full acceptance of our negotiating position. The EU’s intentions were outlined on the basis of the community negotiating point, and the opinions voiced in committee and member state circles. The fundamental interest of the current member states is to avoid that the accession changes the structure and interrelations of European agricultural economy that have emerged over the past decades; the admission of the new members should not provoke a fundamental reformulation of the CAP. The idea is to extend the current regulatory practice and subsidy system to include the new candidates, so that the balance established between the production and consumption of food and other agricultural goods is maintained in a future, broader EU, and the pricing and subsidizing system remains intact because these ensure the realization of the agricultural objectives laid down in the Rome Treaty. Another important aspect is that the change in community budget should be kept to the strict minimum because no member state would undertake to make community contributions significantly in excess of the present ones. Besides, the EU agricultural economy must meet the challenges presented by the world market, and must face the fact that in connection with the WTO negotiations, the protection of markets and the subsidies directly linked to production will be further reduced.
During the negotiations, phytosanitary and veterinary issues, and food safety problems are likely to receive considerable emphasis. Regarding the protection of community consumers, the EU will require the application of the rules in full, irrespective of the specific conditions of the candidates, and also the fact that even the current member states fail to fully meet the requirements.
Along with the other candidates, Hungary fears that the EU interests will dictate the elaboration of transitory regulations applicable for a longer period of time. At the end of this period, full compliance with community regulations, and the implementation of all production limiting measures would be required, while our producers would only have access to subsidies and preferential treatment to a lesser extent than the present members.
It is probable that we could not expect to obtain temporary exemption from enforcing the veterinary regulations, because this would translate into cost savings for the Hungarian producers. (The fact that they would be obliged to allocate amounts of money for investments - to achieve compliance once the transition period is over - far in excess of the savings, is another matter.)
The quotas would freeze production at the present, significantly reduced level, which would put considerable obstacles in the way of development. Our producers would not have the slightest chance to exploit the opportunities presented by increased domestic living standards and an expanding world market. The member states are in complete agreement in that the direct producer subsidies should apply to the candidates only after a predefined transitional period. The existing price differences and the lack of community resources are given as justification. Hungary stresses that the direct producer subsidies constitute an integral part of community regulations, and play a decisive role in generating producer incomes. Because on the unified market, we can calculate with practically identical prices and costs, so the missing supplemental subsidies would put Hungarian producers in a hopeless position in terms of competition, thus fundamentally questioning their future. Over the past few years, Hungarian agricultural prices have approached EU levels, and for key products they are expected to actually catch up with the latter by the time of accession. That is, the membership will not bring extra income to the Hungarian producers through producer prices, however, meeting the community requirements will inevitably lead to extra expenditure.
The EU’s belief that in the post-accession period, the candidates should receive community subsidies primarily for restructuring purposes is well-founded. There is a crying need for modernization and increased efficiency in Hungarian agricultural economy. A number of our producers is already capable of meeting community requirements. However, the majority will be obliged to undergo development in order to produce items that meet market and consumer requirements in every regard. Nevertheless, the restructuring subsidy is only acceptable to us in a form that promotes the development of competitive production, it does not strangle the agricultural sector, it does not result in a significant reduction in production and in the number of agricultural employees, and it does not impart the ability of agriculture to play its long term role in a flourishing, multifunctional rural society and environment.
In order to consolidate opposing views and obtain solutions acceptable for all parties, it is expected that high level political interventions will be needed during the course of the agricultural negotiations. In addition to this, the negotiating parties will have to show a greater inclination than today to accept compromises.
The successful preparation for membership can also significantly contribute to the rapid and favorable conclusion of the negotiations. The adoption of Community agricultural legislation has been going on for years in the framework of the legal harmonization program. In several areas (e.g., regulations pertinent to food products or veterinary issues), more than 80% of Hungarian legislation is harmonized. We plan to take major additional steps in 2001. The adoption of community veterinary regulations can be taken as an example. To enforce directly applicable community rules, our taxation and accounting practices will also have to be amended prior to accession.
The establishment of an institutional system required for the operation of the CAP has been going on for years, too. The tasks were defined in the agricultural chapter of the National Program for the Adoption of Community Achievements. The EU will provide considerable development assistance under the Phare Program. The main tasks to be carried out prior to accession are as follows: Development of the state supervision systems of phytosanitary, veterinary and food hygiene, including controls performed at the outer limits of the future EU. In order to operate the common market regulations adequately, a new, unified producer registration system has to be set up, the registration of animal livestock, arable land and trade turnover balance, and the market and price survey systems have to be developed further. The intervention, export, import and production-limiting controls have to be implemented according to Community rules. Systems suitable for overseeing the disbursement of CAP subsidies (direct producer grants, exportation, regional development), and for controlling proper/abusive use have to be put in place.
It is a crucial question of our accession whether or not Hungarian producers can fully comply with the challenges presented by the CAP, the unified market and the community regulations in general. Despite the fact that the Hungarian budget resources available for agricultural subsidies do not even compare with those of the EU, our system makes a maximum effort to support restructuring, the preparation for the application of community rules, the promotion of producers and sectors competitive on the unified market, the formulation of optimum production output, and the formation of producers’ organizations.
The SAPARD program, providing us with an annual grant of EUR 38 million from 2000 up to the accession date, is also expected to help us a great deal. The competent EU body has approved the Hungarian SAPARD plan, setting forth the concepts for regional and agricultural development using community support in September 2000. Today we are working to prepare the EU-accreditation of the SAPARD institutional scheme. The complete set of conditions necessary for the operation of SAPARD is likely to be established in the first half of 2001.
Nándor Pete
