Research Reports
Changes in Agricultural Structure and Policy Reforms
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AuthorLim, Songsoo
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Publication Date2007.12.01
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Original
The European Union (EU) has experienced a steady change in farm structure and policies. The structural change is highlighted by enlargement of member countries in addition to production intensification and specialization in competitive areas, extensive farming in disadvantageous areas, and polarization in farm sizes. The driving forces behind this change include substitution of capital for labor, a rising demand for large-scale operation and extra income creation, the farm support system's bias toward large farms, and trade liberalization.
A series of Common Agricultural Policy (CAP) reforms have geared means to enhance market orientation and efficiency while addressing multi-functional roles of agricultural activities embedded in the concept of the European Model of Agriculture. The introduction of the Single Payment Scheme (SPS) as decoupled income support and reinforced rural development measures including modulation shed light on the policy direction.
The 2003 CAP reform is forecast to bring about minor effects on production. Cereal and beef production is expected to fall by 0.6 percent and 2 percent by 2010, respectively. Decoupled payments are likely to continue to press for the restructuring of unprofitable farms, but such structural adjustment would be limited by favorable provision of agricultural tax systems. The regressive distribution of direct payments could be persistent, because the SPS is based on previous payments linked to production.
The lessons and implications from the EU's experience can be summarized as follows: First, structural changes are a demanding and on-going process even in a stabilized farm sector, responding to rapidly changing environments. Second, the necessary conditions for a successful policy reform are expansion of policy community (consisting of consumers, the environment, food safety, and sustainable rural development), extension of policy areas, well-defined accountability, and inevitable crisis. Third, a Korean model of agriculture must be established with a policy vision recognizing agricultural multifunctionality. Fourth, the objectives and paths of policy reform must be explicitly provided in advance. Fifth, policy reforms must be accompanied by objective and transparent compensation mechanisms. Finally, to improve the efficiency and effectiveness, policy measures must be time-limited and the extension of same measures must be based on a proper evaluation and assessment.
Researchers: Lim, Song-Soo and Berkeley Hill
E-mail address: songsoo@krei.re.kr
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