THE ARKLETON TRUST

Report of the 1998 Arkleton Trust Seminar

Rural Development, European Enlargement and the WTO Trade Talks

Luka Juvancic and John Bryden
Aberdeen, October 1998

CONTENTS

Publication Details/Acknowledgements

List of Seminar Participants

1. Introduction
2. Raising the Issues
   1. Is there a new approach towards rural development issues in EU
   2. How is EU rural development policy affected by enlargement
   3. How is the Millennium Round of WTO Trade Talks likely to influence rural development policies
3. Rural development issues in the EU
   1. Rural trends in the EU-15
   2. A new approach to rural development
      1. A shift from agricultural to rural preference in the CAP
      2. Rural development in light of the EU regional and cohesion policies
      3. Rural policy as a spatial rather than a sectoral policy
      4. Sustainability and fiscal austerity
      5. The scope and range of the Cork principles
   3. The future challenges
      1. Agenda 2000 proposals through a rural development perspective
      2. Some Budgetary Issues (Agenda 2000)
      3. Rural development policy on vertical level (New Objectives 1 and 2)
      4. Rural Development as a Horizontal policy (Objective 0)
      5. A bottom-up, participatory approach (Local Initiatives)
4. Rural development policy in the context of EU enlargement
   1. Rural development issues in the CEECs
      1. Common problems
      2. Country cases
   2. The pre-accession support
   3. Relevance of the pre-accession measures for rural needs of the CEECs
5. Rural development issues in relation to the likely WTO Trade Talks outcomes
   1. CAP and the WTO Trade Talks
   2. Anticipated course of events
      1. Negotiation standpoints
6. Conclusions
7. Bibliography

Publication Details:

Title:	Rural Development and the WTO Trade Talks. Report of the 1998 Arkleton Trust Seminar, Douneside, Aberdeenshire, Scotland. February 1998
Authors:	Juvancic, L and Bryden, J M
Publisher:	The Arkleton Trust, Enstone, Oxon OX7 4HH
Date:	October 1998
ISBN:	0-90 6724-44-9
Price:	£6.00, including postage within Europe

Copyright in this report belongs to The Arkleton Trust. Permission is given to bone fide researchers and practitioners to quote material from the report without further reference to the copyright holder, provided always that acknowledgement of the original source is given, including any relevant secondary sources cited therein.

The Trusts publications, and further information about its activities, can be obtained from:
The Administrator, The Arkleton Trust, Enstone, Oxon OX7 4HH.
Tel. +44(0)1608 677255;   Fax. +44(0)1608 677276;
e-mail - arkleton@enstoneuk.demon.co.uk

During 1995 the Trusts Research arm, The Arkleton Trust (Research) Ltd, combined with existing research activity in rural development at the University of Aberdeen to form the Arkleton Centre for Rural Development Research. The centre, under the joint directorship of John Bryden and Mark Shucksmith, aims at becomming a centre of excellence in Rural Development Research. For further information on the work of this centre can be obtained from: The Arkleton Centre, St Marys, Kings College, Aberdeen AB24 3UF. Tel. +44(0)1224 273 901; Fax. +44(0)1224 273 902; e-mail - m.p.paterson@abdn.ac.uk

Acknowledgements

The Trust would like to thank:

Michael Tracy, for his excellent chairmanship of the seminar;
Luka Juvancic, for his record keeping and report drafting;
Participants for comments on an earlier draft;
Jackie Cornish for her careful editing of the report following comments from participants;
Caroline Higgs for her care and organisational skills as domestic bursar and travel agent!
Janice and Jenny Clark and Karen Patterson for a splendid evening of Scottish traditional music;
TIAEX for their support for several Eastern European participants;
The MacRobert Trust for allowing us the use of their splendid conference facilities at Douneside;
The Walter Higgs Trust for their support, without which our annual seminars would not be possible;
All of the 24 participants at the seminar who contributed to the learning experience.

List of Seminar Participants

Prof Michael Tracy	Director, APS-Agricultural Policy Studies, 20 rue Emile Frangois, B-1474 Genappe-la Hutte, Belgium Tel: (+32) 2 633 1426 Fax: (+32) 2 633 2371 e-mail: APS-belgium@compuserve.com
Prof Giuseppe Barbero	Dipartimento di Sociologia Universita degli Studi di Roma La Sapienza, Via Salaria, 113, 00198 Rome, Italy Tel: (+39) 6 49918404 Fax: (+39) 6 49918383 e-mail: labcoml@uniromal.it
Peter Baumann	Danish Market Management & Intervention Board, Kampmannsgade 3, DK1780-Copenhagen V, Denmark Tel: (+45) 3392 6900 Fax: (+45) 3315 4340
Prof John Bryden	The Arkleton Centre, St Marys, Kings College, Aberdeen AB24 3UF, Scotland Tel: +44 (0) 1224 272 352 Fax: +44 (0) 1224 273 902 e-mail: jbryden@aberdeen.ac.uk
Patrick Commins	TEAGASC, Agricultural & Food Development Agency, 19 Sandymount Avenue, Dublin 4, Ireland Tel: (+353) 1 668 8188 Fax: (+353) 1 668 8443
Andras Czeti	Secretary to the Structures Working Group, Ministry of Agriculture, H-1860 Budapest, Pf.1. Hungary Tel: (+36) 1 301 4430 Fax: (+36) 1 301 4639
Prof Sophia Efstratoglou	Department of Agricultural Economics, Agricultural University of Athens, Iera Odos 75, Votanikos 11855, Athens, Greece Tel: (+301) 529 4771 Fax: (+301) 529 4764
Prof Miren Etxezarreta	Universitat Autonoma de Barcelona, Dept d Economica Aplicada, 08193 Bellaterra, Barcelona, Spain Tel: (+34) 3 5811680 Fax: (+34) 3 5812292
Gilda Farrell	European Rural Observatory, AEIDL asbl, 260 Chausse St Pierre, B-1040 Brussels, Belgium Tel: (+32) 2 736 4960 Fax: (+32) 2 736 0434 e-mail: leader@aeidl.be
Dr Balthasar Huber	Chef dUniti Diveloppement Rural (Obj. 1 et 6), Commission Europienne, DGVI - Agriculture, Courrier: Rue de la Loi 200, B-1049 Brussels, Belgium Bureau: Rue de la Loi 130, B-1040 Brussels, Belgium Tel: (+32) 2 295 1313/295 Fax: (+32) 2 295 7547 e-mail: balthasar.huber@dg6.cec.be
Luka Juvancic	University of Ljubljana, Biotechnical Faculty, Dept of Animal Science, Groblje 3, 1230 Domzale, Slovenia Tel: (+386) 61 717 925 Fax: (+386) 61 721 005 e-mail: luka.juvancic@bfro.uni-lj.si
Dr Natalija Kazlauskiini	Vice-Minister, Ministry of Agriculture, Vilnius, Lithuania Fax: (+370) 2 616074 e-mail: natalijak@zum.lt
Toomas Kevvai	Ministry of Agriculture (Vice Chancellor), Lai 39/41, EE0100 Tallinn, Estonia Tel: (+372) 625 6209 Fax: (+372) 625 6200 e-mail: tkevvai@agri.ee
Prof Philip Lowe	Centre for Rural Economy, Dept of Agricultural Economics, University of Newcastle upon Tyne NE1 7RU Tel: +44 (0) 191 222 6887 Fax: +44 (0) 191 222 6720 e-mail: philip.lowe@ncl.ac.uk
Heino von Meyer	Pro Europe, Obere-Bahn-Strasse 6, D-21 465 Wentorf, Hamburg, Germany Tel: (+49) 4072 730404 Fax: (+49) 40 727 30405 e-mail: heino.von.meyer@on-line.de
Dr. Iveta Namerova	VZEPP, Trencianska 55, 824 80 Bratislava, Slovak Republic Tel: (+421) 7 5213857 Fax: (+421) 7 5217950 e-mail: namerova@vuepp.sk
Mariana Pavalan	DG of Rural Development, Ministry of Agriculture & Food, 24 Bulevardul Carol 1, Sect 3, 70044-Bucharest, Romania Tel/Fax: (+40) 1 3110378
Dr Philip Rycroft	Scottish Office, AEFD, Pentland House, 47 Robbs Loan, Edinburgh EH14 1TY, Scotland Tel: +44 (0) 131 244 6363 Fax: +44 (0) 131 244 6012
Dr Elena Saraceno	CRES SR1, via P.R. Giuliani 5, 33100 Udine, Italy Tel: (+39) 432 470098 Fax: (+39) 432 470138 e-mail: cres@ud.nettuno.it
Judith Symonds	FDPA, ul. Mokotowska 51/53, m.3., 00-542 Warsaw, Poland Tel: (+48) 22 622 5255 Fax: (+48) 22 622 5245 e-mail: fdpa@ikp.atm.com.pl
Prof Kenneth J Thomson	Department of Agriculture, University of Aberdeen, MacRobert Building, 581 King Street, Aberdeen AB24 5UA Tel: +44 (0) 1224 272000 Fax: +44 (0) 1224 273731 e-mail: k.j.thomson@abdn.ac.uk
Natacha Yellachich	World Wide Fund for Nature, WWF European Policy Office, Av de Tervuren 36 - bte 12, B - 1040 Brussels, Belgium Tel: (+32) 2 743 8800 Fax: (+32) 2 743 8819 e-mail: nyellachich@wwfnet.org
Agata Zdanowicz	Agri-Environmental Working Group, ADF Project/SAEPR, Ministry of Agriculture & Food Economy, ul. Wpolna 30 r. 338/575, 00-930 Warsaw, Poland Tel: (+48) 22 623 1754 Fax: (+48) 22 6231470 e-mail: adfproj@ikp.atm.com.pl

1.Introduction

2. Raising the Issues

2.1. Is there a new approach towards rural development issues in EU?

It is clear that agriculture alone cannot solve rural employment problems. Many observers argue for a further shift from sectoral (agricultural) to a territorial or spatial (rural) orientation of rural policy in order to encourage development of vigorous rural labour markets and assist structural adjustment of agriculture. The extent to which the latest Commission documents (Agenda 2000, Regulation on the Community support for Rural Development) provide a starting point for a coherent rural development policy was an important discussion topic of the seminar. It attempted to examine whether Agenda 2000 heralds a new emphasis on integrated, bottom-up and sustainable approaches in rural development.

2.2. How is EU rural development policy affected by enlargement?

The seminar sought to clarify the rural development characteristics in the CEECs and to examine the extent to which the 'rural development policy' at EU level (in so far as it exists or is emerging) is relevant to the situation in the CEECs. The nature and complexity of rural needs and circumstances in the CEECs was discussed in relation to the 'rural development' approach/content in the pre-accession measures. It is evident that enlargement will affect rural development policy and funding in the existing EU-15, most evidently through the probable adjustments in CAP (at least partly related to enlargement) and the Structural Funds. The seminar also considered the possible impacts and responses of such changes.

2.3. How is the 'Millennium Round' of WTO Trade Talks likely to influence rural development policies?

3. Rural development issues in the EU

It is important to stress that rural areas differ markedly from one another in their economic structure and activity, their natural and human resources, the peripherality of their location, their demographic and social conditions, their history and culture. They are therefore affected in different ways, and to differing extents, by the trends identified. Policies and support structures for rural areas must increasingly recognise this diversity of conditions and outcomes through flexible support structures and devolved responsibility under the subsidiarity principle.

3.1. Rural trends in the EU-15

• The decline in agricultural employment and in the relative economic importance of food production, accompanied by structural changes in the farming industry. As an example, in the early 1800s agriculture employed some 35% of the British labour force, by 1900 this had fallen to about 10%. Now the figure is less than 2%. Although some rural communities remain highly dependent on farming and related industries, the fact is that most of those living in rural areas now depend on other sources of income and employment.
• Associated structural changes in agriculture, including fewer farms and farmers, fewer and larger fields, greater specialisation and generally more intensive production. A dual structure persists - various estimates suggest that one-fifth of all farms produce four-fifths of our food, whilst most have other sources of family income (commonly off-farm jobs, but also a variety of on-farm diversified enterprises, or off-farm businesses and pensions). Research conducted in the 1980s and early 1990s showed that family farming survived better where there were well diversified surrounding labour markets [Bryden et al. 1994]. In the Mediterranean EU Member Countries, it is often a case that rural regions are highly dependent on particular agricultural products (e.g. olives, wine). A similar situation exists in some peripheral and mountainous rural areas in northern Europe, where production possibilities are limited (beef, sheep) and economic diversification has been problematic. This makes the position highly vulnerable to sudden changes in the agricultural support policies. However, the Italian example, where 75% of the farms are smaller than five hectares, shows that where alternative employment opportunities exist, regardless of growing competitiveness on agricultural markets, small farms will not disappear since their pluriactivity means a relatively lower dependence on policies, thus making them much less vulnerable to policy changes.
• Other labour market changes include the growth in the service sector, in some cases a relative or even absolute growth in manufacturing sector employment, as well as growth in female employment, casualisation, part-time employment, and frequently high unemployment. Closer inspection of different rural areas clearly shows that even in the most 'rural' regions, some have experienced growing employment whilst it has declined in others. Moreover, despite this relatively positive growth in rural employment, most rural areas within reasonable proximity of urban centres suffer an employment deficit, in that there is a net outflow of commuters from rural to urban areas [Bollman & Bryden 1997; OECD 1996].
• Tourism and recreation have been key rural growth areas. This and the desire of many urban people to live (and sometimes establish enterprises) in rural areas is linked to the notion that the countryside is increasingly a place of consumption as well as production, including consumption of non-material and non-tradable attributes and public goods which the countryside has - or is believed to have - in greater abundance than urban areas.
• The globalisation of many key elements in the economy, especially finance capital which is highly mobile, the exposure of these elements to increased competition, and the related restructuring of enterprises brings both threats and opportunities. There are opportunities to tap new markets worldwide, to develop new service based activities including knowledge and information based activities which are, in principle, less dependent on location as a result of the extension of markets and the introduction of Information and Communications Technologies (ICT). However, the threats to rural areas' existing activities, often based on natural resources and low-skill manufacturing, are also evident.
• Many rural areas (and enterprises) seek to protect themselves from increasing global competition by creating local products which depend on local identity for their market niche. Indeed, social and environmental capital can play an important role in emerging models of plural economy at micro-level. Local identity is often closely linked to (perceived or real) local cultures or environments, which in essence are non-tradable 'public goods' and can underpin new forms of rural competitiveness and, in some cases, new international market linkages. This does not of course deny the importance of more 'mobile' resources; rather it suggests that such mobile resources are more likely to remain in - or come to - a rural area which successfully develops its indigenous social, cultural and environmental capital.
• The introduction and spread of new technologies, especially ICT is also linked with processes of globalisation and restructuring. Some rural areas, such as the Highlands and Islands of Scotland, have tried to capitalise on the distance reducing effects of ICT, developing new information-based activities which depend on digital telecommunications. Others have sought to widen markets and capture a higher share of 'value-added', for example by using ICT to cut out 'middle-men' in distribution and retailing systems or by using the 'information highway' to market local goods and services directly to consumers and businesses.
• Rural areas normally experience demographic changes associated with the ageing of the population and which, when combined with the labour market changes, lead to increased dependency ratios, declining activity rates and less job-security. There is a fall in annual hours worked per person, an increase in self-employment and part-time working especially amongst women, as well as a rise in long-term unemployment. There is, at the same time, an increased opportunity for leisure and recreation and longer periods of retirement or lower activity, which often spill over into new demands on the countryside as mentioned earlier.
• Population deconcentration is perceivable in some countries in the form of population outflow from metropolitan areas. This is partly due to lifestyle choices, partly related to what Newby (1979) called 'the village in the mind', partly to housing costs, labour market changes, and partly to the perceived crisis of the urban life. The latter is linked to economic and social changes including increased crime, long-term unemployment and decay of urban public goods. Actually the rural and urban population movements and social changes are often inter-linked via a circular flow involving different social classes and age-groups.
• Personal mobility is constantly increasing. It includes commuting, tourism and recreation linked with the emergence of new ('consumption' related) uses for rural space, and new societal demands in relation to the land and landscape. Thus movements of people are a key aspect of rural change and development, and underpin many recent planning and other disputes in the countryside. In-migration, out-migration, retirement, the retention or loss of young people, the return of 'diaspora', commuting, recreation and tourism are all dimensions of this movement.
• The processes of economic change have resulted in the emergence of new winners and losers. The appearance and/or recognition of 'excluded groups' suffering from poverty and/or various other forms of 'deprivation' is a growing problem. Studies have demonstrated that poverty, deprivation and exclusion are as much rural as urban problems, although they take specific forms in rural areas. Reforms in social policies suggest that localities and regions will have to play a bigger role in this respect in future. The potential role of culture as a social inclusion factor in rural areas ought to be recognised.
• Environmentalism has emerged as a powerful ethic and political force. This has broadened into the sustainable development debate - the Brundtland ideas are now widely accepted even if the integration of environmental, economic and social sustainability is still disputed in practice.

3.2. A new approach to rural development

The European Commission has been active in promoting a new approach to rural development in the last ten years. The origins of this new approach lie in:

• the new structural policies of 1987 onwards (Structural Fund Reforms following the Single European Act);
• the subsequent 1988 discussion paper 'The Future of Rural Society';
• the introduction of the LEADER programme in 1991 (as a 'Community Initiative', part of the new structural policy);
• the 1992 CAP reform (the 'MacSharry Reform');
• the Cork Conference in 1996;
• Agenda 2000 in 1997.

The key elements of the new approach are summarised below.

3.2.1. A shift from agricultural to rural preference in the CAP

The rural development aspect has been gaining some influence over the agricultural policy agenda since the late 1980s. Integrated rural development retained a strong position with the MacSharry reform of the CAP (1992). Experience with the LEADER programme is considered positive and the Cork Declaration (1996) brought proposals for radical changes and hence new challenges. Even if the process was set back somewhat with Agenda 2000, the circumstances suggest that rural development and agriculture are coming closer together.

However, a word of caution is needed in the debate about shift of policy preferences towards rural development. There is a danger that shifting from agricultural support to rural development support could result in traversing from one type of distortionary payments to another. New types of budget expenditure need to be justified on different grounds, and more strongly. Conceptual differences between rural and urban visions of regional policy need to be considered carefully, and it is in the mutual interest of the rural and urban worlds that potential collisions between them are avoided.

3.2.2. Rural development in light of the EU regional and cohesion policies

The high and often increasing unemployment rate is the most acute problem in the EU. There is a need to revise the social contract. A question arises as to whether the CAP is entitled to use 50% of the EU budget whilst unemployment rises and not enough is spent to create new jobs.

3.2.3. Rural policy as a spatial rather than a sectoral policy

1. the articulation of over-arching policy goals (sustainable development in economic, social and environmental terms including 'cohesion') since the Structural Funds reform and the Maastricht and Amsterdam Treaties means that sectoral policies must be subsumed by - and contribute to - these goals;
2. because rural and urban Europe are increasingly diverse;
3. because of the principle of subsidiarity.

Whereas the Cork Declaration was clear in calling for an integrated and holistic approach (see below, 3.2.5), Agenda 2000 is less clear, with rural policy in danger of becoming merely a branch of sectoral agricultural policy, or even agri-environmental policy. The Commissioner for Agriculture, Franz Fischler, has made a distinction between 'rural' and 'regional' policy which has been criticised as owing more to intra-institutional rivalries than to logic. On the other hand, the statements of the DG XVI on urban policy have not always been helpful either.

These tensions between agricultural, rural and regional development policies are characteristic of the debates about sectoral and spatial policy approaches. The problematic nature of these relationships is reflected in Agenda 2000 proposals for the Structural Funds and the CAP. It is further recognised that agricultural, rural, structural and environmental policies at EU level have spatial impacts at all levels. Moreover, national, regional and planning policies have impacts on neighbouring regions and countries, as well as at EU level. There is a need for greater recognition of these facts, whilst also recognising that physical planning and many other relevant policies (transport, infrastructure, housing etc.) are largely dealt with at national levels, and the EU has no legislative 'competence' in these areas. Hence the ideas for a 'voluntary' approach to integrating policies, and considering spatial impacts of all the various policies at EU and national levels, within the European Spatial Development Perspective (ESDP).

3.2.4. Sustainability and fiscal austerity

There is an increasing emphasis placed on the need for 'self-sustaining' private and public initiatives. This may reflect a concern in some quarters that some initiatives funded by the Structural Fund programmes, and perhaps also LEADER, may not be viable following the ending of public support. Alternatively, many such initiatives may have recurrent expenditure implications which are not sustainable in the longer term, especially in an era of fiscal austerity.

3.2.5. The scope and range of the Cork principles ¹

The idea from the Conference was that there should be a single 'Integrated Rural Development' programme for each rural 'region', and this also links (although not necessarily so) with the concept of the Single Rural Fund which was widely discussed at Cork, if not explicitly called for in the Declaration. The issue of the role of small towns and villages and mention of village renewal is also significant given their place in diversified rural labour markets and service provision. However, important questions remained about how rural regions are going to be defined and delimited for policy purposes, and how these will relate to urban areas with which they have important (but not necessarily mutually reinforcing) economic and other relations. Moreover, the conference failed to unite the interests of agriculture and other rural partners.

Ideas agreed in the Cork Declaration seem to be broadly right in principle. However, there appears to be no grassroots for rural lobbying comparable with agricultural and environmental lobbying. The failure is both political and institutional. Political failure is perceivable through lack of intellectual support on rural development issues between Brussels and national ministries. Institutional failure is a result of the alienation of senior policy officials from academic life and from practice on the ground. Decentralisation of institutional structures has a major role to play in reducing failures and mobilising the rural population ².

Not even the Commission itself is unanimous upon the issue of rural development. Views of the main players, DG VI and DG XVI differ significantly. The issue of competence within the Commission plays a crucial role on both levels - EU and national. Different standpoints of DG VI and DG XVI were clarified at the Cohesion Forum (Brussels, April 1997) ³. The principles of rural development agreed in the Cork Declaration mostly did not find their way into the Cohesion Forum concluding documents (Annex 2). Therefore it must be stressed that rural policy is an essential part of regional policy. In this view, which stresses 'growth-pole' and 'trickle-down' ideas, there is no conflict between urban and rural. However, rural areas should not be regarded just as a synonym for decline, but as areas with actual and potential comparative advantages and a wide array of development perspectives.

Factors which represent or reinforce comparative advantage in today's globalised world are various - economic and non-economic ⁴. It not just cheap labour that is in abundance in the world market; information is getting increasingly accessible at decreasing cost. It must be assumed, in a world of decreasing barriers and mobility of capital, information and skills, that competitive advantage in areas where the (real) cost of labour is high will increasingly depend upon attributes or assets of a region or country which are not mobile. These will include elements of economic, social and environmental 'capital' which are particularly associated with specific countries and/or regions and which underpin or reinforce particular 'qualities' of goods or services produced in those localities. Thus, Scotch Whisky, Irish Music, Roquefort Cheese, Parma Ham, Shaker Furniture, Harris Tweed are globally recognised brands which rely upon a predominantly rural set of images, demonstrating a way in which regional identity plays a prominent role in creating a comparative advantage in the world market.

1. Outcomes of the European Conference on Rural Development, held in Cork (Ireland) in November 1996 are summarised in the Cork Declaration (Annex 1).
2. The question about absence of rural lobbies is complex. Not only conflicts between the interests of agricultural and regional policies, but also other factors such as opposition of national financial ministries to increase government spending, have to be taken into consideration. Clearly the importance of sectoral agricultural policy has reinforced the strength of the agricultural lobby, whilst the growing importance of regional policy is strengthening regional policies. The rural lobby remains highly fragmented.
3. Bringing together more than 1200 people with responsibilities in the field of economic and social cohesion policy in the EU, the Cohesion Forum (Brussels, 27-30 April 1997) organised by DG XVI attempted to pave the cornerstones of the future regional and cohesion policy. Indeed, the Agenda 2000 proposals on regional development and cohesion policy reflect the principles agreed on the Cohesion Forum.
4. Non-economically quantifiable factors, such as social capital, play a prominent role in creating regional comparative advantages. The case of HIE support for Gaelic language and cultural investment can serve as an example of building of comparative advantages through local capacity. On the other hand, non-economic measures can have indirect negative effects on local economies (e.g. closing down of the local school).

3.3. The future challenges

3.3.1. Agenda 2000 proposals through a rural development perspective

The Agenda 2000 strategy can be seen as a step towards global competitiveness. However, in terms of integrated rural development it represents a step backwards in some important aspects, namely:-

• Beneficiaries are discriminated against (only, or largely, farmers are eligible for support in most areas of rural development, at least outside the Objective 1 and 2 designated areas);
• The scope for diversification of rural economies outside Objective 1 and 2 areas is restricted by the definition of measures eligible for support and by limitations on public sector support;
• The emergence of EMU will have deep consequences also on rural development in terms of reduced competitiveness of economically fragile rural areas in the Community, leading either to higher unemployment, greater outward migration, or downward adjustments in wage rates and this is not reflected in the proposals;
• A growing focus on the competitiveness of agricultural production will additionally affect small producers and will have a negative effect on natural biodiversity.

It also has to be stressed that in the present rural development debate, there is an over-obsession with the Community dimension of the issue. Agenda 2000 is pulling the problem back to the national/regional level, by emphasising the principles of subsidiarity and concentration. The relative decline of the sectoral approach is mirrored by the increasing importance of the spatial approach. This allows the member States to develop national and regional specific policies and then combine these with EU policies and measures in a more integrated and coherent set of spatial strategies. This is in fact being actively debated in many EU nations including Scotland, Ireland and Germany.

3.3.2. Some Budgetary Issues (Agenda 2000)

Table 1: Overview of the new financial framework (1997 prices: bECU)

As can be seen from Table 1, total structural spending in the EU-15 is expected to decrease to 27.3 bECU, whereas total agricultural spending is projected to rise to 50.0 bECU. This includes 3 bECU for the three existing Accompanying Measures (agro-environment programme, farmer retirement, farm forestry), and 2 bECU for the 'new' rural development measure. Agricultural spending in the new member States and in pre-accession aid is expected to increase from 1.3 bECU in 1999 to 3.0 bECU (1997 prices) in 2006, much smaller than the sum allocated to structural operations.

The 2 bECU allocated to the new rural development measure includes the existing Objective 5a outside Objective 1 regions, and Objective 5b, as well as the LFA compensatory allowances, totalling approximately 1.9 bECU. This means that there is, in effect, no new money for rural development, unless the expected 'room' within the agricultural guideline materialises and, further, that this is utilised for rural development.

It is possible that the Rural Community Initiative following LEADER will be proposed as a horizontal measure, as indicated by the Commissioner at the November 1997 symposium '800 LEADERs give their views'. As the Community Initiative will be a 'single fund' initiative, it is probable that 'LEADER III' will be managed by DG VI. It is speculated that the budget will be between 2 to 3 bECU, which compares with 1.7 bECU for LEADER II. However, although the Commission services are keen to retain the basic principles of LEADER (bottom-up, integrated partnership approach, experimental nature) there will have to be some form of prioritisation in order to limit the number of actions and the area covered by them.

Bringing together the different types of EU support for the accession countries of Central and Eastern Europe, total pre-accession support over the period 2000-2006 is proposed at 21 bECU at 1997 prices (3.5 bECU for structural assistance for agriculture; 7 bECU under the Cohesion fund, and 10.5 bECU under PHARE). In addition, 53.8 bECU is allocated for the new member States between 2002 and 2006, most of which is for structural operations. The total of 74.8 bECU for both of these items compares with the overall budget for 2000-2006 of 772.5 bECU at 1997 prices.

3.3.3. Rural development policy on 'vertical level' (New Objectives 1 and 2)

The choice of territorial level in analysing the differences in performance of regions is of crucial importance. NUTS 2 remains the basis for selection of the new Objective 1 areas. There are vast differences in development between the core and peripheral regions and these problems are not always properly addressed. The new Objective 1 areas should cover a smaller proportion of overall population (20% instead of today's 25%). The GDP calculation for the previous Objective 6 areas and for the new German Länder remains an open question. There is also a possibility of different interpretations of the GDP calculation, especially in the regions that are likely to lose their eligibility (Ireland, Highlands and Islands...).

The new Objective 2 areas will cover 15-20% of the population, but only 5% in rural areas (as compared with 9% covered by Objective 5b). Criteria for designation of Objective 2 and 5b areas were too loose, and are being tightened up. However, there are certain difficulties about the criteria for the new Objective 2 areas and some open questions remain unresolved:-

• Does the designation basis on the territorial level NUTS 3 offer enough information about the local specific needs and development potentials?
• There are large differences in the share of agricultural employment between the member States. How will the Commission address that problem in order to find equitable criteria?
• Population decline is not a typical rural problem. The figures in many regions show a strong cyclical trend and not every type of migration pattern has the same characteristics (e.g. migration of retired people to rural areas vs. migration of young families, daily migration (commuting) from rural to urban areas).

Although the assumptions of the model used are not specified, the first estimates of future designation of the new Objective 1 and 2 areas, according to the criteria proposed by the Commission, reveal very interesting results:

Table 2: Distribution of the eligible areas by member state

In practice, the Commission has introduced a 'safety net' to limit the effects of loss of present Objective status suffered by any one country. Nevertheless, the fact remains that the proposals inevitably mean that fewer rural areas will be eligible under Objectives 1 and 2 than are currently eligible under Objectives 1, 5b and 6. There will also be transition measures for areas losing status and the importance of this should not be underestimated. Outside the 'Objective' regions, there is an option for member States to build rural development policies around the horizontal measures in the new rural development regulation. This provides for the combination of the 1992 CAP reform's Accompanying Measures (agri-environment, afforestation, early-retirement), existing Objective 5a measures and the new horizontal 'Article 31' ⁵ rural development measures into 'Single Rural Plans'. Since only agri-environment is compulsory, the other measures may be combined in different ways according to regional and national needs (the so-called 'menu approach').

It can be anticipated that regional policy framework as proposed in Agenda 2000 will if anything increase the urban emphasis in Structural Funds spending. This emphasis was already evident in the two previous planning periods.

5. Article 31 of the draft Regulation implementing the rural development elements of Agenda 2000, which deals with a menu of items concerning farm and rural diversification, village renewal, rural infrastructure, etc. formerly funded by EAGGF under Objective 5b and 5a.

3.3.4. Rural Development as a 'Horizontal' policy ('Objective 0')

While the horizontal element may give some assurance to farmers that reductions in CAP support will be 'compensated' by new rural policies, those in richer regions may doubt whether there will be a juste retour in terms of financial flows. The relevance of this problem can be seen from the current experience, where the funds available for the CAP Accompanying Measures are not spent in total. Since participation in these measures is voluntary, their effectiveness depends upon whether they are sufficiently attractive to farmers compared to the price support policies. In most cases, returns from the market support of production still outweigh those from participation in structural programmes. Thus, farmers, as economically rational producers, prefer to choose the option which brings them higher financial returns.

As we have seen, (3.3.3 above) the draft rural development regulation provides a 'menu' of activities eligible for support. Within this menu, only agri-environment will be compulsory, leaving member States to 'mix-and-match' measures at national or regional level according to their needs and circumstances. The choice of 'rural development' measures under 'Objective 0' will thus depend to a greater extent than previously on the independent choice of individual states/regions, which will be involved in their co-financing.

Price support schemes allow no discrimination between farmers. However, there is a political constraint in the Structural Funds expenditure, since the rural development support schemes, financed from the EAGGF Guarantee have to limit their expenditure exclusively to measures which benefit the agricultural population ⁷. Therefore, the proposed Rural Development Regulation also leaves a sense of doubt in strictly financial terms. The future EAGGF Guarantee expenditure on rural development measures (previously Objectives 5a and 5b plus the 1992 Reform 'Accompanying Measures'), enlarges the box but limits beneficiaries almost entirely to farmers. The difference in magnitude between the funds available for the new Rural Development Initiative ('LEADER III: 2 to 3 bECU over seven years) and the new Rural Development Measures (Objective 0: 35 bECU over seven years) eloquently demonstrates the ambiguity of the future situation.

National expenditure for non-agricultural rural development programmes outside Objectives 1 and 2 is to be more strictly regulated by the Commission under the competition rules. Although national/regional governments will gain greater room for manoeuvre in designing their development policies as a result of the amalgamation of rural policy schemes under Objectives 1, 5a, and 5b under the common policy framework, they may lose room for manoeuvre on levels and rates of support, especially outside Objective 1 and 2 regions.

Nevertheless, it is not clear whether member States and the European Parliament will accept the Commission's proposals. A growing proportion of the EAGGF Guarantee expenditure on rural policy measures and consequently greater freedom to the Commission in related budgetary expenditure may influence the European Parliament's decision that would (in the case of the acceptance of the Commission's proposal) actually vote for a decrease in its executive power.

6. This occurred after the Arkleton Seminar, although several participants had obtained the draft regulations prior to their publication, and these were discussed.
7. Both sections of the EAGGF are subject to Article 39 of the Treaty of Rome.

3.3.5. A bottom-up, participatory approach (Local Initiatives)

LEADER I and II experiences

An innovative approach with promotion of bottom-up oriented rural development was launched by the LEADER I Community Initiative in 1991. The two generations of LEADER projects have proved to be successful in many respects, although the growing bureaucracy in LEADER II has been criticised. Above all, LEADER has strengthened the principle of partnership. The rural development programmes are not so much about money as they are about the process. Working in a wider policy network, the regions are not just pursuing their own narrow development objectives but also contribute to the achievement of wider policy objectives.

However, the two generations of LEADER Initiative have also shown some important deficiencies. One such deficiency is a lack of sufficient transnational co-operation between projects. This co-operation is essential in terms of innovations and good practice and also in the catalytic effect successful programmes can have on other rural areas. More importantly, the LEADER Community Initiative is not as efficient as usually thought and the financial uptake of LEADER II in many countries is so far rather poor. In the future, the Commission suggests a stricter evaluation of the quality of programmes, concentrating on the number of jobs created or retained and on their sustainability.

Negative experiences from LEADER II derive from an abundance of approved projects (over 900 vs. 217 LEADER I Local Action Groups) which has logically resulted in the watering down of their financial and other resources as well as its transformation from an experimental scheme to one which is more mainstream. The LEADER Observatory proposes that the new Rural Development Community Initiative insists on a ceiling of 300-350 approved programmes. However, this approach may appear to violate the principal strength of the LEADER objectives, which is not in financial or direct employment terms but rather in the stimulation of innovative approaches in diversification of rural economies and in local capacity building. Therefore, programmes under the new Rural Development Community Initiatives should not be approved purely on administrative selection criteria. The decision making process should involve the existing information and evaluation of the LEADER network which has achieved positive results.

Prospects for 'LEADER III'?

The need for bottom-up development involving both horizontal and vertical co-operation and partnership, suggests a combination of Structural Fund (Objective 1/5b) and LEADER mechanisms for planning and implementation of integrated rural programmes. This is reinforced in the Cork Declaration (Point 6), which stresses decentralisation, subsidiarity, and the need for flexibility. However, in many regions there is little sign of a bottom-up approach or of public participation in development planning and processes, despite the rhetoric.

Moreover, administrative regions, which we must assume for the present to be the level at which the European Commission will direct the new policies, are usually too large to make bottom-up participatory approaches feasible. Most likely, bottom-up will be a philosophy or approach to development on the one hand, and a set of eligible measures (on the LEADER model) on the other. There is no reason why LEADER type local development measures should not in future be supported by mainstream Objective 1 and 2 programmes, although there remains a good case for a selective, experimental scheme which focuses on socially fragile rural areas, stresses integrated (social, economic and environmental) development and emphasises partnership, participation and innovative methods. However, the bottom-up approach also has its hindrances. It is hard to expect that the bottom-up orientation of rural development policies will be efficient if all the remaining public structures are top-down oriented.

Agenda 2000 proposes a rural 'Community Initiative' which the Commission wants to be 'at least as innovative as LEADER I'. Informally, this is being called LEADER III. It is understood that the Commissioner favours LEADER III being available in all rural areas, albeit with a mechanism for prioritising eligible areas or themes such that the total number of such areas will be reduced. Moreover, since the initiatives will be 'single fund' financed, 'LEADER III' will be financed by EAGGF Guidance. Such an outcome presents many of the same issues as the proposed rural Accompanying Measure regarding: scope and content, eligible clients, modulation of EU support, etc. Funding of the rural 'Community Initiative' explicitly from EAGGF on a 'horizontal' basis would aggravate the cohesion principle of its implementation, although this objection could be alleviated by a tighter system of prioritising economically and socially fragile areas.

The discussion did not result in a clear answer about the future of Community Initiatives as far as the viability of the LEADER programmes are concerened. However, it succeeded in highlighting various elements of rural 'cross-complexity'.

4. Rural development policy in the context of EU enlargement

As discussed in the previous section, a new approach to rural development has been emerging in the context of the existing EU-15. Whilst rural development is clearly a priority for many of the CEECs, it is not clear whether or how this new approach is applicable in the CEE countries, although the pre-accession programmes should inform us on this point in due course. In this respect, the proposed EU pre-accession programmes were discussed in terms of their ability to address the complexity of the rural needs of the CEECs.

4.1. Rural development issues in the CEECs

4.1.1. Common problems

Initial decline in agricultural output in most of the CEECs has been followed by a constant increase in output. There is an open dilemma about the role of agricultural policy - should it encourage further increases in output or re-orientate towards promotion of non-agricultural activities in rural areas? Additional problems arise from the lack of government resources to regulate agricultural production in environmentally sensitive areas.

Rural development was a non-existent concept in the formerly centrally-planned economies, thus rural programmes have not so far been developed. Moreover, today the rural-urban mobility of labour is limited by a lack of employment opportunities and housing in the urban areas. Collapse of public structures (services, social care) and no alternative employment for skilled labour has resulted in an increase in the rural population. The social buffer role of agriculture should not be underestimated. However, this role can interfere with the development of competitive agriculture.

Despite frequent (mainly legitimate) criticisms regarding existing Community support programmes for capacity building assistance in the CEECs (PHARE programmes), some of its positive aspects also have to be recognised. A positive aspect of the PHARE programmes is that they introduce the principles of subsidiarity and co-financing in the policy-making process of the CEECs. In addition, PHARE programmes have been important in enhancing co-operative networks.

4.1.2. Country cases

Estonia
Estonian agricultural policy with zero or even negative levels of agricultural support can be seen as an antidote to CAP. However, the existing agricultural policy has resulted in a rapid decline of agricultural population and in an increase in unemployment. Estonia is trying to drive its agricultural policy as cheaply as possible. It aims at restructuring and modernising agriculture in order to enhance its competitiveness on the international market. However, the market itself is distorted, mostly due to the subsidised EU exports of agricultural commodities.

The long-term objective is also to enable the rural areas to become attractive places for the non-farming community to work and live. In this respect, effective mechanisms of rural development policy have to be set up. Preparation of a legislative background for rural development can be seen as a first step in this direction. Estonia does not rely solely on the future support of Structural Funds in rural development, but is also developing its own structures.

Slovakia
For Slovakia, the importance of creating rural development policies based on the bottom-up principle was stressed. New employment opportunities for people who leave agriculture have to be provided. However, the unstable present political situation hinders development of an integrated rural development policy.

Lithuania
Whilst Lithuania was a part of the USSR, the traditional village structures were demolished. With the decline of state farms, new players are entering the rural economies. The objective of rural support measures is to decrease the reliance of farmers on public support and to stimulate the local communities into organising themselves. The existing rural development policy framework should be simplified, with clear priorities and enrichment of corresponding funds and the principle of partnership.

The Lithuanian experience provides an interesting example. While the EU Structural Funds support still builds upon redistribution of the public resources, Lithuania has decentralised the policy making process and reduced the role of the Government in providing policy guidelines. The state is promoting rural development with lump-sum financial assistance, while decisions about development priorities and co-financing are taken at the regional level. When/if the EU Structural support does come, it will be just an additional financial source for the implementation of existing policies. This appears to be similar to the structure being proposed for post-Agenda 2000 measures in some of the existing EU member States.

Romania
The Land Law (1990) restored private ownership of land, but only up to 10 ha, and no financial or other kind of support for the land owners has been provided. This generated a high degree of land fragmentation and large number of subsistence farms (the average farm size in Romania is now 2.4 ha). Industrial restructuring - especially in the mining industry - increased unemployment in rural areas. In addition, Romania has an ageing rural population resulting from out-migration by young people to the cities. High unemployment rates are particularly evident in regions which were artificially industrialised, where the transition has led to a spectacular collapse of the industrial base and provoked high levels of out-migration.

Since 1997 a policy for rural development has been worked on and a fund for rural development will be coming into operation during 1998. Four Rural Observatories (newly established NGOs around four Universities) will carry out studies and research related to rural development activity. Partnerships between MAF - DGDR and different institutions and bodies involved in rural area development (Ministry of public works and territorial planning, Ministry of labour and social assistance, Ministry of industry and commerce, Ministry of water, forests and environmental protection, etc.) have been studied and are currently in the process of approval.

The institution building and legal harmonisation process in the field of agriculture and rural development is in progress in preparaton for the EU accession. However, it seems to be slow and difficult because, on the one hand, specialists are neither prepared nor trained for it and, on the other hand, there is a lack of communication both between the applicant countries and the EC and between different directorates of the Commission, for example: DG I, DG VI, DGXXVI, etc.

Hungary
Farm co-operative networks have been established within the county organisational level. With the opening of the land market, a problem of land speculation by foreign owners has emerged. Partly as a consequence, lively environmental lobbies have developed. It has been stressed that EU rural policy should provide a flexible policy framework to embrace the wide variety of country/region specific development problems. The problem of regional absorption capacity was raised, highlighting the importance of capacity building.

Slovenia
At present, the competence for policies and programmes with rural impact is dispersed between different ministries. The existing rural development policy in Slovenia can be described as top-down, sectoral, poorly co-ordinated and lacking in reconciliation of tasks between the ministries which often brings an overlapping of functions. Public support in the most remote regions (which are, as a rule, determined also by difficult conditions for agriculture) is almost exclusively limited to infrastructural investment support and agricultural price support measures.

The existing Slovene rural development policy concepts are challenged by far more comprehensive and structured EU policy mechanisms. In this respect, redefinition of rural development policy in Slovenia should not be seen as an imperative of simple adoption of the EU policy framework but rather as an opportunity to design its own set of guidelines, to provide an institutional framework that would match the corresponding EU structures and to encourage enrichment of public funding with private funding.

4.2. The pre-accession support

The partnership agreement with the applicant countries will be renegotiated every year. The Structural Funds assistance can contribute up to 75% of project value, as for the Objective 1 areas. The EAGGF assistance will provide 10% of the assistance in advance, followed by monthly payments, in order to ease financing problems. As soon as an applicant country becomes a full member of EU, it will no longer qualify for the pre-accession assistance. The remaining funds will be redistributed to the remaining candidates. The CEE applicant countries are recommended to start immediately with the preparation work. Restitution of the nationalised land to private ownership and improvement of competitiveness of the food industry are identified by the Commission as the tasks of primary importance.

4.3. Relevance of the pre-accession measures for rural needs of the CEECs

Since the CEECs are a heterogeneous group in the terms of agricultural structures, it is necessary that the Community assistance offers enough flexibility to the individual states/regions to decide upon the most appropriate measures. However, it appears that the mechanisms for the CEE accession countries, proposed by the Agenda 2000, do not offer enough flexibility to run a rural policy specific to the needs of individual countries. In the EU, it is often the case that the structures and capacities at regional level are not capable of delivering development plans. Constraints are present in both financial and human resources terms. That problem will be more evident in the accession candidates from CEECs. The pre-accession support should therefore focus on capacity building, training and the development of structures and not merely on financial support for 'hard' infrastructural development. The emphasis on capacity building and improvement of agricultural structures in the existing support programmes was oriented to the existing EU structures, which are (especially in the case of the CAP) moving targets for the CEEC candidates.

5. Rural development issues in relation to the likely WTO Trade Talks outcomes

5.1. CAP and the WTO Trade Talks

The long-term objective for agricultural trade reform negotiations was set out in the Mid-Term Review of the Uruguay Round as: 'to establish a fair and market-orientated agricultural trading system' which would be reinforced both by commitments on support and protection, and 'strengthened and more operationally effective GATT rules and disciplines'. This long-term objective also involved 'substantial progressive reductions in agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets'. There were commitments to 'achieving specific binding commitments in .... market access; domestic support; export competition; and to reaching an agreement on sanitary and phytosanitary issues.' Nevertheless, it was noted that commitments should be equitable, 'having regard to non-trade concerns, including food security and the need to protect the environment'.

It should be noted that all subsidies paid to, or revenue foregone from, agricultural producers with respect to production of food and most raw materials (both crop specific and non-crop-specific) are included in the assessment process, including regionalised aids. Exceptions listed are:

1. support not exceeding 5% of the value of production of a basic agricultural commodity or, for non-crop-specific support, 5% of total agricultural production,
2. 10% de minimus for developing countries,
3. certain direct payments in production-limiting programmes where payments are based on fixed areas and yields, and such payments are made on 8% or less of the base area of production, and livestock payments made on a fixed number of head.

It is argued by some that the Agenda 2000 proposals on agriculture, which essentially involve a widening and a deepening of the 1992 CAP reforms, represent an 'opening position' of the Community on the next trade round. Many commentators argue that the proposals do not go far enough to meet the probable demands of our trading partners, and that the EU will be isolated on the protection issue (with the possible exception of support from Japan) at the start of the talks in 1999. To take one example, the FAPRI Policy Working Paper 03-97 which is a 'first look' at the CAP reforms in Agenda 2000 argues that these would adversely affect future US and EU trade relations [section 2.3 of the present document]. At first sight, it seems the reforms do not go as far as the FAIR Act does in the U.S.

It is, on the face of it, a fair working assumption that the trade round starting in 2000 will eventually give rise to the need to reduce EU agricultural subsidies by a significantly larger amount than is proposed in Agenda 2000, which actually increases the level of budgetary payments to farmers in the existing EU-15. It is at this stage that 'non-trade issues' come to the fore, and these will clearly need to be better articulated in future as the basis for agricultural, agri-environmental, rural, and related 'green box' supports, especially those with agricultural producers as the sole policy clients. In this context, we can note that the Commission's 1997 document 'Rural Developments' raises three main sets of arguments for a rural development policy:-

1. 'Rural development is essential to agriculture' (this is exactly the message of our large comparative study of farm household dynamics in 12 EU countries between 1986 and 1992 [Bryden et al. 1994])
2. 'Rural development is essential to the environment and quality of life'
3. 'Rural development is essential to economic development and cohesion' [CEC 1997b: 72-74]

8. The references which follow in square brackets refer to the various Articles in this Decision.

5.2. Anticipated course of events

5.2.1. Negotiation standpoints

LFA compensatory allowances, especially direct payments per LU, have clearly contradictory effects. However, that problem may be overcome by the new Commission proposal, which foresees only direct payments per hectare which are linked to environmental conditions (cross-compliance). It is likely that the proposed switch of the LFA measures to area payments may cause income problems for the farmers of the extensive pastures in large areas of the Mediterranean, in the west of Ireland and in the Highlands and Islands of Scotland, unless there is sufficient modulation and differentiation within the scheme. Although such modulation and differentiation is included within the proposals, it will be necessary to avoid 'discrimination' by appealing to an objective basis.

The 'Millennium Round' of WTO Trade Talks will concentrate primarily on the issues of free market access and trade. However, they are likely also to raise dilemmas about the externalities of production. This issue will be raised particularly by the EU since their negotiation starting-point on the trade issues tends to be weaker. Commitment of the European side will be devoted to environmental and rural development considerations (e.g. decoupling subsidy according to the environmental aspects and incorporation of rural diversification measures). It is also likely that the European side will raise the questions of food safety, animal welfare and consumer protection (e.g. genetically modified agricultural products and use of growth hormones in animal production etc).

In its promotion of rural development issues, the EU has to be aware not only that the reaction of its opponents will be negative, but also that some of the member States will react in the same way. A switch from strictly agricultural to rural development support in the budgetary expenditure could also trigger demands for inclusion of specific commitments from the rural development measures in the AMS calculations. The Commission's proposal for horizontal rural development measures, financed from EAGGF with the farming population as the main beneficiaries of public support might also be questioned by the opposing groups. These are all non-trade issues and the response from the negotiating partners could be that they do not have their place in the trade talks.

The environmental aspects of international agricultural trade will have to be clearly defined. All the negotiating parties have given their commitments on the UN environmental forum. Therefore, some issues can be raised, such as:-

1. Sanitary and phytosanitary aspects, use of GMOs in agricultural production;
2. Does non-sustainable use of water resources in south-west USA have economic (and trade distorting) impacts on production?
3. Is use of growth hormones in animal production in accordance with the concepts of sustainability and animal welfare, let alone human health?

The interests of the Less Developed Countries (LDCs) should also be seriously taken into consideration. It can be anticipated that LDCs will refuse to sign the agreement if the questions of greater access to the world market with less trade and non-trade distortions (e.g. taxes, food labelling), especially from the EU side, are not solved. They will also open the question of food security.

If the Trade Talks of the Millennium Round come to a deadlock on the agricultural issues, strong external pressures can be expected from other sides (e.g. participants industrial and intellectual property rights talks) to come to an agreement as soon as possible (2003?).

Procedural complications
Procedural complications stemming from different interpretations of the legal text of the GATT Uruguay Round Agreement from the negotiating parties can be expected.

EU Enlargement
The WTO talks will take place at the same time as the pre-accession negotiations with the first group of candidates from the CEECs. Double standards of the CAP (e.g. absence of income support for farmers in new CEE member States) will additionally weaken the EU argument for the need for agricultural income support. In addition, some of the CEECs that are applying simultaneously for membership of both the WTO and the EU are exposed to pressures from both sides.

Environmental considerations
As has already been suggested, environmental issues are likely to be raised in the WTO Trade Talks by the EU negotiators in particular, mainly as a contra-argument of the agricultural countries with higher levels of agricultural protection. The OECD agri-environmental indicators have been prepared explicitly to establish a standardised instrument to guide the debate about sustainable use of agricultural areas. These indicators were originally designed to assess aspects of ecology and cultural integrity. However, in the later stages of negotiation, discussion about these indicators was 'hijacked' by the agricultural secretariat (influenced by the Cairns group) which proposed to develop only indicators such as soil, water and farm financial resources. The EU reacted with a proposal to include landscape and habitat, but this was both weak and late. The present definition of (synthetic) OECD agri-environmental indicators corresponds to the interests of the USA and the Cairns group and they will probably insist on their use as a basis for the WTO agricultural trade talks.

Rural development issues
There is a threat that European rural development will be trapped in the Brussels - Geneva prison. There is a distinction between the rural and urban package of economic assistance. Agriculture in regional economies is becoming only a narrow area of concern. Structural Fund (ERDF, ESF) actions in designated rural areas are not problematic from the point of view of the WTO Trade Talks. However, the same cannot be said for the EAGGF Guarantee expenditure, especially if 'rural development' assistance turns out to be only or mainly for farmers. On the other hand, the WTO pressure can be seen as a positive catalyst for the European rural development debate which is always in danger of becoming sectoral. In the EU, too little attention has been devoted to the theoretical and methodological basis of its rural policy measures. Ultimately, this reflects the relative strength and organisation of the farming and rural (territorial) lobbies.

'Greening of CAP'
According to the commitments of CAP, agreed in the GATT Uruguay Round, the dilemmas about future agricultural policies have a dual character. The question is how to make these policies greener - in both policy and environmental senses of the term.

Un-utilised opportunities
The set of measures agreed in the 'Green box' includes farm income and crop insurance. This measure has never been seriously discussed in the CAP agenda, whereas it is widely used in some of the WTO trade partners (e.g. Canada).

Rural development issues as a subject of separate talks?
An idea to launch the rural development issues as an 'own negotiation' theme emerged at the Seminar. However, launching such an idea demands bringing together allies, which takes a lot of political effort and time. In addition, the legal terms of such a move have to be reconciled.

9. According to the GATT Uruguay Round agreement on agriculture (URAA), the agricultural policy instruments are classified in three groups, popularly called 'boxes':

   'Red box' - measures that are directly subject to decisions, agreed in the URAA. They include market support measures, such as import levies, export subsidies and intervention purchases. They represent a significant part of the AMS calculations and have to be reduced substantially over the implementation period.

   'Blue box' - conditionally permitted measures. Compromise solution that includes measures, such as compensation payments.

   'Green box' - recommended measures without direct market influence, such as decoupled direct payments, rural development support, R&D, marketing channels support, sanitary & phytosanitary improvements...

6. Conclusions

Not all conditions in rural areas are the same, even within the existing EU-15 and even more so when the CEECs are considered. However, most of them share a need to diversify rural employment and income earning opportunities in ways which cause least harm to the environment, and indeed which build upon synergies between the environment, quality of life, and new sources of income and work.

Critical issues for Rural Development therefore concern:

• Institutional frameworks, especially the respective roles and responsibilities of the EU, existing and applicant member states, regions, and localities. These need effective and democratic governance; flexibility to deal with diversity; integration and co-ordination of sectoral policies; participation of local people; and support for local initiatives, as well as policy efficiency and effectiveness at all levels.
• New ways of retaining and enhancing rural competitiveness in an increasingly globalised economy. Public support should focus more on non-mobile assets - environment, social and economic capital, including capacity building and improving institutional effectiveness. Rural development policies should allow enough flexibility to cope with growing diversity and should encourage multi-sectoral and bottom-up participation. A climate of innovation and entrepreneurship should be broadly supported. Diversity of rural areas should be encouraged in a sustainable manner.
• Tackling inequalities of opportunity and access, at CEEC-EU, national, regional, local, rural-urban, and interpersonal levels. This clearly includes the cohesion agenda, but goes beyond it.

Whilst Agenda 2000 takes us some way towards the right kind of framework, weaknesses remain. The rural policy framework remains fragmented and incomplete, as well as underfunded compared with the agricultural policy. The shift to a spatial and integrated rural policy will now depend heavily on the individual member states, since it very largely hinges on their decisions about implementation of the options for a 'single rural plan' for all structural type measures in the rural development proposals, and the ways in which they will integrate national measures with these. For most member States this raises fundamental institutional and structural issues which are likely to remain un-resolved in the medium term if only because there will be insufficient time to address them in the time between approval of the regulations and the need to implement them, which is now likely to be less than one year. This issue is even more critical with respect to the CEECs, where EU measures are often implemented separately from national structures.

7. Bibliography

Bassand, M, Brugger, E., Bryden, J. M., Freidmann, J., and Stuckey, B. (1986) Self-reliant Development in Europe. Gower, England and Vermont.

Bollman, R. and Bryden, J. M. (eds) (1997) Rural Employment CAB International: Oxford.

Bor, W.V.D., Bryden, J. M. and Fuller, A. M. (1997) Rural Human Resource Management Mansholt Studies 10, Mansholt Institute: NL

Bryden, J. M. (1994) Prospects for Rural Areas in an Enlarged Europe in Journal of Rural Studies, vol.10 no. 4 .

Bryden, J. M., Bell, C., Gilliat, J. and MacKinnon, N. (1994) Farm Household Adjustment in Western Europe, 1986-92 European Commission: DG VI Research Series.

Bryden, J. and Commins, P. (1997) Future Prospects for Rural Areas AES Conference: Edinburgh

CEC (1996) The Cork Declaration . Published in LEADER II Magazine, Winter 97, No. 13. Special Issue.

CEC (1996) First Report on Economic and Social Cohesion, European Commission: Office for Official Publications.

CEC (1997a) Agenda 2000: For a stronger and wider Union Bulletin of the European Union, Supplement 5/97.

CEC (1997) Rural Developments VI/1117/97 CAP 2000 Working Document. European Commission, DG-VI.

FAPRI (Food and Agriculture Policy Research Institute) Policy Working Paper 03-97: The European Union's Proposed "Agenda 2000" CAP Reforms: A First Look October 28 1997

Newby, H. (1979) Green and Pleasant Land? Social Change in Rural England. Harmondsworth Penguin.

OECD (1996) Territorial Indicators of Employment Focusing on Rural Development:OECD, Paris.

Saraceno, E. (1994) Recent trends in rural development and their conceptualisation in Journal of Rural Studies vol. 10 no. 4.

Tracy, M. (1997) Agricultural Policy in the European Union and Other Market Economies APS: Belgium

Tracy, M. (1996) Government and Agriculture in Western Europe (Fourth Edition) APS: Belgium.

Tracy, M. (ed.) (1991) Rural Policy Issues The Arkleton Trust: Oxford.

Tracy, M. (1997) The Challenge of Enlargement: An EU Perspective Pannon Agricultural University: Mosonmagyarovar, Hungary

Von Meyer, H. (1997) Rural Employment in OECD Countries: Structure and Dynamics of Regional Labour Markets in Bollman and Bryden op cit.

Annex 1: The Cork Declaration - a living countryside

Annex 2: Results of the Cohesion Forum

On 28, 29 and 30 April this year, the Commission organised a forum in Brussels attended by more than 1200 people with responsibilities in the field of economic and social cohesion policy across the Union. Here is a summary of some of the main conclusions drawn by Monica Wulf-Matthies, The Commissioner for cohesion policy.

Mrs Wulf-Matthies reminded her audience that mutual solidarity is the cornerstone of the Community's cohesion policy and that the poorest regions of the Union should remain the main recipients of the Community structural assistance.

The accelerating pace of structural change, affecting not only industrial regions but rural and urban areas as well, means that the Community needs to step up its efforts, the Commissioner said. The regions have to be helped to diversify the fabric of their local economies and increase their capacity to innovate, in particular by developing information technology and encouraging R&D activities.

People are the Union's principal resource. It is essential, She said, that the Structural Funds provide more support for the acquisition of skills and life-long training, as well as stimulating the jobs market and fleshing out Community employment policy. Regarding the operation of the Structural Funds, some of the participants at the forum proposed reducing the number of objectives under the Funds to two. Mrs. Wulf-Matthies tended to favour three Objectives for the period after 1999, namely:

1. one Objective centred on reducing development disparities and confined to the least prosperous regions of the Union, defined according to the strict application of current statistical criteria (i.e. where GDP per capita is less than 75% of the EU average)
2. one Objective concerning the necessary flanking measures for structural change in urban and rural areas
3. one Objective focusing on human resources (training and employment policy).

Similarly, in terms of simplifying procedures and concentrating assistance, the participants in the forum called for a reduction in the number of programmes, in particular by cutting back the variety of Community initiatives.

The debate also confirmed the necessity of assessing the results of Community assistance. Simply checking that money had been disbursed is not enough. Objective criteria need to be set for measuring the efficiency of expenditure. The assistance provided by the Structural Funds should be regarded less as an entitlement and more as an incentive to running efficient and effective development programmes. With budgets tight everywhere, more diverse ways of providing assistance have to be considered, such as: combinations of subsidies and loans, interest-rate subsidies, loan guarantees, etc.

The likely milestones for the review of the Structural Funds after period 1999, are as follows: during the summer of 1997, the Commission will present its overall financial perspective for 2000-06 ('Santer package'); the European Council to be held in Luxembourg should adopt this in December 1997; in the spring 1998, the Commission will submit its proposals for new Structural Fund regulations and these should be adopted in the course of 1998 ¹⁰.

10. At the time of final writing of this report, this is now considered to be March 1999.