European Union expansion
November 01, 1994
by Teresa Acklin
Accession would cause agricultural adjustments for new member countries.
Editor's note: the European Union is set to expand its membership on Jan. 1, 1995. Austrian voters approved joining the E.U. in June; Finland, Norway and Sweden were scheduled to hold elections after World Grain went to press. This article examines the issues raised by the accession for the individual countries and the E.U. as a whole.
The addition of Austria, Finland, Norway and Sweden to the European Union would bring the number of countries in the E.U. to 16, with a total population of 367 million and a land area stretching from the Arctic Circle in the north, the Atlantic Ocean in the west and the Mediterranean Sea in the south and east. In agricultural terms, the expansion would extend the type of farming from the pine forests, tundra and reindeer of the north to the olive groves and goats of the south.
Farming representatives in the Mediterranean countries believe that the four new members will create an even more top-heavy Common Agricultural Policy, with structures and payments geared to the production conditions of northern Europe. This may be true in terms of environmental and structural payments, since all four countries have large areas of mountains and forests. Because the three Nordic countries are so different in geography and climate from the rest of the E.U., a new structural fund category for Nordic agriculture has been introduced.
In the overall budget, however, the effect is expected to be broadly neutral, and by the end of the five-year transition period, the new members will be paying in approximately Ecu 1 billion more than they take out.
Trade between the existing 12 member states and the four applicants is already at quite a high level, but it is expected to increase considerably when they join. The fact that they have relatively stable currencies is likely to have a stabilizing effect on the Ecu and will dilute the dominance of the deutsche mark. The forests of Sweden and Finland would make the E.U. self-sufficient in timber.
All four countries are largely self-sufficient in basic food products, including cereals, potatoes, sugar beets, dairy products, pig meat and poultry. Production is based on small family farms, which are at the moment heavily subsidized; support prices in the four countries run between 10% and 50% above comparable support levels in the 12 current member countries.
Bringing the four new members under the wing of the CAP is expected to result in the disappearance of a large number of family farms, particularly those involved in cereals production. Consequently, the levels of compensation needed to carry out this structural change have been at the center of much of the accession negotiations.
The four applicant countries would have to bring their support prices down to E.U. levels from day one of accession. To ease the changeover, the E.U. has agreed to a five-year transition period for Austria, Finland and Norway, allowing national aid to bridge the price gap. Sweden, however, has been working toward E.U. membership for several years and is the only one of the four applicant countries to have brought support prices down close to E.U. levels.
On the plus side, the rural economies of the four will benefit from the fact that they all have large areas of land that will qualify for environmental and Less Favored Area payments.
Environmental payments are made to growers as compensation for farming less intensively by using minimal amounts of fertilizers and pesticides. The goal is to preserve natural landscape and encourage wildlife.
Less Favored Area payments apply to livestock production on hills, uplands and heathlands, where productivity is low because of poor grazing conditions. A special category of these payments applies to mountainous areas.
In terms of cereal production and trade, the four new members would add between 2 million and 3 million tonnes to the E.U.'s surplus. Together they produce 14.2 million tonnes of cereals against domestic consumption of slightly more than 12 million. Finland would become the E.U.'s second largest producer of oats, and an export refund system would be introduced even though no intervention support would be provided for the crop.Austria
Of the four new members, Austria is closest geographically to existing E.U. members, sharing its western borders with Germany and Italy. To the east, Austria shares borders with the emerging Eastern Bloc countries of Hungary, the Czech Republic, Slovakia and Slovenia.
Agricultural production is based on small to medium family farms, with an average size of 20 hectares. Most of the marketing is handled by farmer-owned cooperatives. Price support levels are from 10% to 50% higher than in the E.U.
In the mountainous regions, the main enterprises are cattle, with forestry as another source of income. But the most important source of income is tourism, and a very high proportion of farms have guest accommodations.
Austria produces between 4 million and 5 million tonnes of cereals a year, of which about 500,000 to 900,000 tonnes are exported. Although the country is mountainous, the level of crop production is high.
With its continental climate, Austria grows a wide range of cereals, including maize and durum wheat, as well as wheat, barley, oats and rye. Average yields are below those of Great Britain, France and Germany, but above those of Spain and Italy. High producer prices are backed by export subsidies and import protection measures.
Attempts to reduce production and bring it more in line with market demand have resulted in the introduction of cereal area quotas and support prices for alternative crops. Since 1992, Austria has been changing its price support system for cereals to bring it more into line with the E.U. The target price has been set at the wholesale level rather than the producer level for coarse grains and milling wheat.
In its policy of diversification, the country is becoming one of the leaders in producing energy from biomass. Around 10% of its energy supplies come from renewable resources, with wood chips used for fuel, and biodiesel, based on rapeseed, gradually replacing fossil fuels.
Austria will benefit from the E.U.'s structural and environmental programs, which will subsidize farmers in the mountainous regions. Farmers in these areas will also receive additional national aid for at least 10 years.
|Population: 7.8 million|
|Area under cultivation: 7 million ha|
|Average farm size: 20 ha|
|Annual cereal production: 4.2 million tonnes|
|Cereal exports: 545,000 tonnes|
|Cereal imports: 184,000 tonnes|
|Wheat:||production 1.1 million tonnes|
| ||area 241,000 ha|
| ||average yield 4.2 tonnes per ha|
|Barley:||production 1.1 million tonnes|
| ||area 265,000 ha|
|average yield 4.1 tonnes per ha|
|Maize:||production 185,000 tonnes|
|area 172,600 ha|
| ||average yield 6.5 tonnes per ha|
|Rye:||production 278,000 tonnes|
|area 69,000 ha|
| ||average yield 4.0 tonnes per ha|
|Oats:||production 185,000 tonnes|
|area 53,000 ha|
|average yield 3.6 tonnes per ha|
Finland is the most remote of the new entrants, with its long eastern border adjoining Russia. Large areas of mountains cover the north, where nearly a third of the country lies in the Arctic Circle; much of the southeast is covered with lakes and forests. More than 77% of the country is forested, and only 9% is agricultural land. The main cereal growing area is in the southwest.
Livestock and forestry are Finland's most important farming enterprises, and the country gives a very high priority to environmental farming. About 15% of total arable land is used for crops for human consumption, while two-thirds is used for feed grains, such as barley and oats. Oilseed production is increasing.
Despite the climatic and topographical limitations, Finland produces about 3.5 million tonnes of cereals. With annual oats production running at around 1.2 million tonnes, Finland would become the E.U.'s second largest producer after Germany. Yields are 40% to 60% below the E.U. average, but are still above those of Spain and Italy. Grain marketing is handled by the state-controlled Finnish Grain Board.
Finnish agriculture has been heavily protected through high price support levels that are 40% to 50% above E.U. levels. These supports are supplemented by export subsidies and import restrictions.
Production has been running above consumption for the last 30 years, and measures have been introduced to steer the two toward a better balance by introducing quotas, restrictions on enterprise size, producer contracts and limitations on specific crops. At the end of 1993, Finland introduced a new pricing system more in line with that of the E.U.
Membership in the E.U. would speed up changes in Finland's farm structure, but because of its geography and climate, the entire country would be eligible for Nordic, national and/or E.U. aid to maintain rural communities and enterprises.
Arable farmers are expected to be worst hit by E.U. membership. According to a study by the Agricultural Economics Institutes in Helsinki, Finland, half the arable farmers in the country could leave farming.
Although arable farmers are hampered by the country's geography and climate, the productivity of Finland's livestock farmers is equal to the best in the E.U. With the prospect of a 40% cut in feed grain prices, livestock farmers are expected to gain the most from E.U. membership.
|Population: 5 million|
|Area under cultivation: 12.3 million ha|
|Average farm size: 13 ha|
|Annual cereal production: 3.4 million tonnes|
|Cereal exports: 900,000 tonnes|
|Cereal imports: 30,000 tonnes|
|Wheat:||production 360,000 tonnes|
| ||area 100,000 ha|
| ||average yield 3.6 tonnes per ha|
|Barley:||production 1.6 million tonnes|
| ||area 460,000 ha|
| ||average yield 3.7 tonnes per ha|
|Rye:||production 26,600 tonnes|
|area 22,700 ha|
| ||average yield 2.5 tonnes per ha|
|Oats:||production 1.2 million tonnes|
|area 330,000 ha|
| ||average yield 3.6 tonnes per ha|
Stretching from the Arctic Ocean in the north to the North Sea in the south, much of Norway is a long narrow strip of mountains and fjords between the sea and the Swedish border to the east. Norway's land area is similar in size to Finland's, but a much higher proportion is in coastal areas and mountains.
The average farm size is 30 ha, and the main agricultural enterprise is dairy farming, which accounts for more than 40% of the value of agricultural output and 50% of total employment.
Because of its geography, Norway, with annual production of about 1.5 million tonnes, is the smallest cereal producer of the four applicant countries. Marketing is handled by the monopoly Norwegian Grain Corporation, which will have to be phased out during the accession period.
Norwegian agriculture is among the most highly protected in Europe, with fixed producer prices, supply control measures and import tariffs and quotas. Farmers are supported with direct payments based on region and size of holding.
Norway has begun a reform strategy for agriculture along the lines of the CAP, but because of the high level of protection given to its farmers so far, unofficial E.U. estimates indicate that up to 50% could leave the land as a result of E.U. membership.
But Norway will also qualify for the E.U.'s Nordic aid for almost two-thirds of its land area, and 70% of the agricultural land will come under the E.U.'s Less Favored Area status.
|Population: 4.3 million|
|Area under cultivation: 8.8 million ha|
|Average farm size: 30 ha|
|Annual cereal production: 1.4 million tonnes|
|Cereal exports: none|
|Cereal imports: 140,000 tonnes|
|Wheat:||production 325,000 tonnes|
| ||area 60,000 ha|
| ||average yield 5.4 tonnes per ha|
|Barley:||production 615,000 tonnes|
| ||area 170,000 ha|
| ||average yield 3.6 tonnes per ha|
|Oats:||production 450,000 tonnes|
|area 120,000 ha|
| ||average yield 3.8 tonnes per ha|
Sweden is the largest of the new members, both in terms of land area and population. It has the third largest land area after France and Spain, and its average farm size is 30 ha. Sweden is in the middle of the three Nordic countries, bordered on the west by Norway and on the east by the Gulf of Bothnia, the Baltic Sea and Finland. About 15% of its land area lies in the Arctic Circle. Much of the southeast is covered by lakes and forests.
Only about 3% of the population is involved in full-time farming, and the number of farms has declined by 60% in the past 40 years. Nearly 60% of Sweden's land area is covered by forests, with less than 10% in arable crops and grazing. About 70% of farming enterprises involve forestry as well as agricultural products.
The country produces more than 5 million tonnes of cereals and exports about 1 million a year. Sweden has a highly organized system of farmer-owned cooperatives, which are responsible for marketing the main agricultural commodities.
Spring barley has largely taken over from oats as the main feed grain, and Swedish farmers have been encouraged to grow more pulses to reduce surplus cereal production. Sweden is self-sufficient in all the main livestock products except mutton and lamb.
The Swedes began to adapt their agricultural policy several years ago to align it more closely with the CAP, and no transition period will exist if the country joins the E.U. Major changes were begun in 1990 when prices were deregulated and export subsidies removed in a move to a more market-orientated system.
These changes are similar to those under the CAP reform plan involving a cut in support prices, set-aside and area-based compensation payments. Sweden is the only country of the four applicants whose support prices are close to E.U. intervention levels.
But with its huge areas of lakes, forests and mountains, Sweden will qualify for large payments from the E.U.'s structural funds and environmental support payments.
|Population: 8.6 million|
|Area under cultivation: 3 million ha|
|Average farm size: 30 ha|
|Annual cereal production: 5.2 million tonnes|
|Cereal exports: 1.04 million tonnes|
|Cereal imports: 50,000 tonnes|
|Wheat:||production 1.75 million tonnes|
| ||area 296,000 ha|
| ||average yield 5.9 tonnes per ha|
|Barley:||production 1.67 million tonnes|
| ||area 397,000 ha|
| ||average yield 4.2 tonnes per ha|
|Rye:||production 230,000 tonnes|
|area 46,000 ha|
| ||average yield 5.1 tonnes per ha|
|Oats:||production 1.3 million tonnes|
|area 304,000 ha|
| ||average yield 4.3 tonnes per ha|