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The Common Agricultural Policy and the Lisbon Strategy

On 2 February 2005 the European Commission relaunched the Lisbon Strategy for the European Union (EU). The strategy seeks to tackle the EU's urgent need for higher economic growth and job creation and greater competitiveness in world markets. It is a major EU policy priority. The Lisbon Strategy aims to provide people with a better standard of living in an environmentally and socially sustainable way.

The guiding principles for the contribution of the Common Agricultural Policy (CAP) to the Lisbon Strategy were set by the European Council in Göteborg in 2001 and confirmed in the Lisbon Strategy Conclusions in Thessaloniki in June 2003: "Strong economic performance" that goes hand in hand with "the sustainable use of natural resources". These principles have shaped recent CAP reforms.

Without the CAP many rural areas of Europe would face major economic, social and environmental problems. Rural development measures, in particular, can play a significant role in fostering and maintaining prosperity in rural areas. The CAP will continue to make a concrete contribution to more growth and jobs in the future.

Agriculture - the heartbeat of rural areas

The agricultural and rural constituency is important. Rural areas cover 90 % of the EU's territory and are home to approximately 50 % of its population. Agriculture and forestry are the main land users and play a key role in the management of natural resources in rural areas and in determining the rural landscape. Agriculture makes a valuable contribution to the socio-economic development of rural areas and full realisation of their growth potential.

Agriculture's wider contribution to the EU's prosperity is considerable. The agri-food sector (including beverages) accounts for 14.2 % of total EU manufacturing output, with EUR 675 billion worth of production. It is the third largest employer in Europe and the second biggest exporter of foodstuffs globally, with agricultural exports worth EUR 61.088 billion in 2002.

Europe's citizens are deeply attached to the diversity of landscape created by the wide variety of agricultural structures and farming types in the EU. Safeguarding this means investing in the future, creating new employment possibilities and encouraging rural diversification. People must be offered opportunities to create wealth as well as long-term rewarding job prospects. That is why the Lisbon Strategy is as important and relevant to rural areas as it is to urban Europe.

Making the new CAP work for Lisbon

The CAP has been in a process of ongoing reform since the early 1990s. Reforms have focused mainly on increasing the competitiveness of agriculture by reducing support prices and compensating farmers by the introduction of direct aid payments. A decisive step came in the 2003/2004 CAP reform with the decoupling of direct aids from production and a realignment of the CAP with consumer concerns. This reform was a key step towards a more market oriented and sustainable CAP.

The new CAP, post 2003/2004, is a fundamental contribution to the Lisbon process.

The new CAP focuses farmers on their businesses and places emphasis on market orientation rather than market support. It removes many of the negative incentives within the old CAP. A more entrepreneurial approach will require a change of culture and working habits in many organisations and will require support and encouragement (both political and financial). This will remain a major challenge in the coming years. For these reasons, the instruments of rural development will grow in importance.

Rural development is central to the Lisbon process

Rural development is the key tool for the restructuring of the agriculture sector, and to encourage diversification and innovation in rural areas. Enlargement has changed the agricultural map and getting the restructuring process right is essential for macroeconomic growth. Rural development policy can help steer this process towards a higher value added, more flexible economy – in line with the Lisbon Strategy.

In all Member States rural development can help promote competitiveness in the agricultural and food processing sectors. Innovation as well as information and communication technologies (ICT) must play their role. As in other sectors, valuable research and development (R&D) must be moved out of the lab and onto the farm.

Local initiatives such as Leader, which has contributed to the creation of new jobs, to the improvement of incomes and to the promotion of equal opportunities in rural areas, and support for diversification (on farm and off farm), can play an essential role in connecting people to European ideas and encouraging innovation and entrepreneurship. The environment and associated tourism are a major source of income and employment potential in rural areas.

The prizes are there for those who are determined and imaginative, as practical experience in the Member States already shows.

EU priorities for rural development

Rural development policy does not operate in a vacuum. Many measures are relatively small-scale. But rural development actions can ensure that small-scale local infrastructure is put in place to connect rural communities with major investments under regional and cohesion policies. The significant EU structural funds invested in telecommunications, transport, energy and water infrastructure can be capitalized on via local strategies for diversification and development of agricultural and food sector potential. Rural development can help supply the multiplier effect.

The Lisbon Strategy focuses, among other things, on improving education and training, research and development and the promotion of innovation and sustainability. These are exactly the results the Rural Development tool-box can deliver.

Investing in human capital and skills is crucial to exploiting opportunities for growth and employment in rural areas. These factors cut across the full range of rural development activities as they can contribute to:

  • helping people adapt to a more market oriented agriculture
  • promoting new ways of selling/dealing with risk in competitive markets
  • raising economic and employment activity rates
  • encouraging development of micro-businesses
  • facilitating innovation and R&D take-up
  • fostering dynamic entrepreneurship
  • improving management of processes in the agri-food chain
  • encouraging the take-up and use of ICT
  • making use of opportunities from improved local infrastructure, and environmental land management.
Environmental win-win situations

Agriculture and forestry remain by far the largest land users, shaping the rural environment and landscape. The provision of environmental goods, particularly through agri-environmental measures, can form a basis for growth and jobs provided through tourism and rural amenities. There is particular scope for innovative approaches that add value to the rural economy by remunerating farmers for environmental services and linking these to diversification into tourism, crafts and training. Similar linkages can be made in the non-food sector.

The adoption of precision-farming techniques can improve the economic and environmental performance of farms. Environmental projects, including management of Natura 2000 sites, can provide important spin-off effects by acting as demonstration/tourism/training projects.

There are opportunities to expand production of biomass and renewable energy sources. This would not only create new economic opportunities in rural regions, but would help Europe respect its greenhouse gas reduction targets under the Kyoto Protocol. Measures to develop renewable energy raw materials and processing capacity already operate under the CAP. One example is the aid of EUR 45 per hectare available to farmers who produce energy crops.

Cost/benefit analysis

Recent surveys show that European citizens appreciate the benefits of changes in the ways the CAP supports farmers and rural areas. 66 % of EU citizens consider the adjustment of the CAP from a system based on production-linked subsidies to one which funds the protection and development of the overall rural economy (as well as providing direct support to farmers) as a good thing.

Although EU public opinion clearly perceives the CAP as continuing to provide value for money, improvements can still be made. The Commission has proposed an amount of EUR 88.75 billion for the new single Rural Development fund over the period 2007-2013. These amounts are necessary to achieve the declared objectives of rural development policy, to permit innovation and diversification outside traditional agri-businesses, and to be able to respond to society's expectations for a competitive agricultural, forestry and food sector which is environmentally sustainable and underpins the socio-economic fabric of EU rural areas.

Rural development policy involves the cofinancing by the EU and Member States of a variety of measures. Member States decide on the most appropriate measures for their rural areas from a menu of measures proposed at EU level. The policy epitomises the 'partnership' element of the Lisbon Strategy, and is essential due to the wide diversity of the EU's rural areas.

The CAP and rural development policy 'make a difference'

In the agricultural sector, and in rural areas, the EU is pursuing balanced economic growth and technological improvement, and the creation of new jobs, but without jeopardising the future standard of living of any region and, above all, in a way that is environmentally sustainable. A market-oriented CAP and a growth-oriented and innovative rural development policy are central elements of this.

 

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Newsletter - Special edition:  "Putting rural development to work for jobs and growth" [pdf] (03/2006)
Also available in:
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growth and jobs - working together for Europe's future


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