Challenges faced by the agro-food sector in Western Balkans as regards its integration with the EU markets

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1 Challenges faced by the agro-food sector in Western Balkans as regards its integration with the EU markets CHALLENGES FOR THE AGRO-FOOD SECTOR IN THE PROCESS OF EU ACCESSION: THE CASE OF CROATIA Ramona Franić, Ornella Kumrić Faculty of Agriculture, University of Zagreb, Croatia contact address: ABSTRACT Since attaining independence in the early nineties, there have been great politic and economic changes in Croatia. Transition from planned to market economy, change of agricultural organization, liberalization of domestic market, war and its consequences have had strong impact on a whole Croatian economy as well as on agriculture itself. After a period of declining numbers, since 2000 the national economic situation is characterized by significant economic growth, which can be seen in the increase and stabilisation of the main economic indicators and agricultural recovery. The process of EU accession accelerated the transition of agricultural sector, and even more the adjustment of agricultural legislation and policy measures towards the CAP standards. Key words: Croatia, agriculture, agricultural and rural policy, EU accession 1 Introduction Since attaining independence in the early nineties, there have been great political and economic changes in Croatia. Transition from planned to market economy, change of agricultural organization, liberalization of domestic market, war and its consequences have had strong impact on a whole Croatian economy as well as on agriculture itself. Declining numbers were a consequence of decreased utilization of agricultural resources (land and cattle) as well as migration of population and general decline of productivity and economic efficiency (Franić et al., 2003; Franić, 2006b). Consequences were seen in stagnation of GDP, as well as in increasing of negative agricultural trade balance (RH-MPŠVG, 2003). Since the year 2000, however, the national economic situation is characterized by significant economic growth, which can be seen in the increase and stabilisation of the main economic indicators. Agro-food sector, as still very important segment of Croatian economy shows recovery as well, but, despite positive trends, great effort has to be put into achieving its international competitiveness, mostly by increasing measures for creating the environment in which Croatian farmers could utilize their own strengths and increase productivity and efficiency (Franić at al., 2006; EIZ, 2007). The whole process of achieving these tasks is incorporated into the main strategic goal of Croatian policy: membership in the EU. Therefore, the process of adjusting Croatian legislation, but also the agricultural structure, towards the Common Agricultural Policy (CAP) standards has been going for a decade now (Franić at al., 2003). Although a lot has been done, the legislative and institutional framework are not entirely harmonized, and further activities are necessary in rural development process, improvement of food quality, food and feed safety and achieving the veterinary and phyto sanitary standards (Franić, 2006a; MAFWM, 2007). 1

2 2 The situation in agricultural sector and rural areas 2.1 The macroeconomic environment During the socialistic period, prior to the years of the war , Croatia had been rather capable of covering most of the foodstuff needs of the country, thanks to in comparison with most of the other ex-yugoslavian states a well developed industrial and service sector, especially in the tourism branch. War devastation and transition problems have caused significant structural changes in these pillars of the Croatian economy. Since the year 2000, the national economic situation shows considerable improvements in comparison to the 1990s. The main macroeconomic indicators are increased and stabilized: average annual GDP growth was above 4.5%, the inflation rate of 1.8% in 2003 was recorded as being the lowest one in all transition countries, although showing a growing tendency accompanied by an increase of the consumer price index (MAFWM, 2007). The overall boosting Croatian economy contributed to the stabilisation on the labour market, although the registered unemployment rate still remains at a high level (Table1). 2.2 Agricultural situation According to diversity of agro ecological conditions (climate, soil, relief), Croatia is an "Europe in small size", and such characterized as a land of valuable natural resources (Bašić and Franić, 2003). Not only rather quality soils, but also water resources, forests and coastal area enable development of agriculture, fishery, forestry and all forms of rural tourism. If we disregard the imperfection of Croatian land statistics, we can conclude that about two third of the land is classified as agricultural land and forests, and the rest as settlements, with forests covering almost half of the total land. According to the relief and clime, Croatia can be divided into three large geographical regions (Pannonian, Mountain and Adriatic Region), each of them with their specific characteristics, determining the resource use and production structure. In the agricultural land structure, the largest share of arable land are plough land and gardens, than pastures, meadows, orchards and vineyards. In the structure of cultivated areas cereals dominate, followed by fodder and industrial plants, while a smaller surface is planted with vegetables and aromatic herbs (Franić, 2006). Agriculture, as a principal rural activity, is rather important sector in Croatian national economy. Although diminishing during the last decade, the share of agriculture (plus hunting, forestry and fishing) in total employment is still high in comparison to the western European average, while the contribution of these sectors in creation of GDP is slightly below 7% in the analysed period (Table 2). The majority of agricultural activities is performed by family farms, which own about two thirds of the total agricultural land and more than 80% of all livestock, and those are mostly mixed farms (combining livestock breeding with crop farming), with dual nature of labour force and income. If we take into consideration only those agricultural households that own more than 2 ha of agricultural land (as potentially commercial), in Croatia there are almost 149 thousand of farms. Land fragmentation, unsolved property rights and consequently small average size of farms (about 2.4 ha) are strong limitation factors in achieving agricultural competitiveness. According to some previous research (AFZ, 2005) and recent data (Table 3), crop production shows permanent growth since 1995, while livestock production still lack behind for about 30% comparing to The greatest share in gross agricultural value is from crops, mostly cereals, while livestock products contribute to the total value of agricultural production with 2

3 about 40%. Agricultural production is characterized with rather low and very variable yields compared to the European average, resulting with unbalanced supply and demand and foreign trade deficit. Due to the CBS data, the value of purchased agricultural products has been increasing since 2002, and in its structure the most important products are raw cow mild, than cereals, live pigs, poultry, beef and wine. The purchase prices for most of the products show absolute growth, and especially for fruits, vegetables and wine. Minor increase, or even decrease was registered for livestock products, with an exception of cow milk (where purchase prices have considerably increased). Statistics show that expenditures for food, beverages and tobacco in total households' budget were slightly decreasing during the analysed period, but are still about high 36.5%, with the increase of agricultural retail prices, while the prices of industrial food products are rather stable. The concept of rurality in Croatia has long been vague and undefined just like in the majority of transitional countries. However, upon approaching the EU and accepting the European model of agriculture, the rural areas had to be defined in a manner that would enable some comparisons to the EU and other countries. So, for the needs of some strategic documents, there were attempts to define rural areas according to EU definitions: about 85% of the Croatian territory can be categorized as rural, with an expressly low population density only 34 inhabitants per km 2. The demographic statistics show that rural population decreased absolutely and relatively since 1991 (Census 1991), and in 2001 (Census 2001) the rural population made up about 44.4% of the total number. In the inter-census period the trend in ageing of the rural population continued, the ratio between the younger and older population and education structure are especially unfavourable. 2.3 Agricultural trade Croatia recently accelerated its economic and market transformation by opening itself to global markets through WTO and CEFTA memberships, cooperation with the South-East European neighbours and, especially, signing of the Stabilization and Association Agreement (SAA) with the EU. The trade liberalization component of the SAA ties Croatia to an emerging European-wide free trade area and provides an opportunity to boost FDI and trade flows. There are great expectations of trade liberalization and foreign investments to stimulate competition, introduce new technologies, and increase productivity in order to sustain growth. In the year 2002 the regime of more liberal foreign trade has started with greater number of countries, resulted with an increase in value of total foreign trade, so of agro-food sector as well. In the analysed period there was registered continuing growing trend of import and export of agro-food products, however the rate of export growth was higher than of import. In 2006, import of agro-food products was about 1,495 mill. EUR, and its share in total imports is 8.7%. Agro-food export in the same period has achieved 923 mill. EUR, decreasing the trade balance deficit (570 mill. EUR), and now its share in total export is about 11.2% The most important agro-food products in foreign trade are products from food, beverages and tobacco industry (refined sugar, cigarettes, fish and fish products, Vegeta food condiment, confectionery products, bear), with considerable greater share than agricultural products (wheat, maize). In the value of imports, the major share is from fruits, live animals and livestock products, baker products and sweets, but important import products are also live cattle, sugar, oil meals, pigs, bananas etc. The most important trading partners in agro-food trade are EU countries, participating with more than 40%, than countries of ex-yugoslavia with more than 25% in total trade. The most 3

4 important export destinations in 2006 were Bosnia and Herzegovina (with share of 25%), Italy (16%), Japan (8%), Serbia + Montenegro (7%) and Slovenia (7%). In the structure of agro-food import, European countries predominate: Italy, Germany and The Netherlands from which 30% of the total value of imported products have been provided. The greatest amount of foreign trade in agro-food products was realised with the EU countries, so in 2006 it was about 1,495 mill EUR, out of which with the EU-15 it was 1,018 mill. EUR and with EU-10 (member-states from 2004) it was 477 mill. EUR. 2.4 Agricultural policies With its membership in WTO, Croatia has took the pledge to diminish tariff protection for agro-food products and to decrease domestic support in agriculture. Tariffs has been decreased for approximately 50% with regard to the pre-wto period, but there are some exemptions and also the transitional period is longer than for developed countries. In the process of decreasing domestic support, Croatia has also the right to decrease it in a smaller amount in comparison to the developed countries and with longer transition periods. Since March 2003, Croatia has entered to CEFTA and such arranged its trade relationships with countries who share the common goal of entering the EU. Stabilization and association agreement (SAA) was signed in October 2001, arranging free trade area by abolishing all tariffs and quantitative restrictions, with the exemption of some agricultural and fish product. EU has almost entirely abolished tariffs and import restrictions for Croatian products, except for baby beef and specific fish products, wine and beverages. By the gradually decreasing tariffs about 28% of the products have been involved, and by quota system about 42% of the total agro-food imports. Regarding domestic support in agriculture, in year 2002 the new Law on state support in agriculture, fishery and forestry has been adopted and enforced in The precondition for its implementation was introducing the Farm register, as the administrative base for managing agricultural finances. The intention was to make the support system in agriculture more simple and transparent, with actual harmonization of the support by the sawn area. Besides the previous production incentives model (area payments in crop production 1 and per head in livestock production 2 ), three new models of support have been introduced: income support, capital investment and rural development. By this reform it was supposed to gradually adjust the agricultural policies with the policy that is or should be implemented in the EU. The aim was to re-allocate funds in favour of these new models, with partial decreasing of production support. During the last couple of years, activities on the harmonization of market mechanisms for particular agricultural products with the market organisation in the EU have been continued. Wheat has been among the first products to which some of the EU market regulation standards have been applied. In contrast to the previous practice of state-subsidized purchase of wheat, the wheat trading is fully determined by the market. Only the minimum (guaranteed) price was prescribed in 2006, in case the market price should fall below a determined level. A gradual harmonisation of this area with the EU market standards is expected during 2007 and Production incentives for crop-productions comprise 30 different items: in arable crop production the greatest amounts are given for wheat, maize and oilseed crops; large amounts are paid for vineyard foundation and as annual payments, as well as for fruits (orchard foundation and particularly for strawberries) and olive production (olive trees, processing and extra virgin olive oil). 2 Out of 28 items in the livestock support scheme (including payments for meadows and pastures), the biggest amount of subsidies (more than 55%) is given for cow milk and dairy cows (more than 16%), while smaller amounts are allocated to livestock fattening, breeding and apiculture. 4

5 The establishment of a Wine Cadastre, with a fully digitalised vineyard cadastre is currently being established, which will comprise the data on vineyards (varieties, breeding forms, the number of grape-vines, slope, etc.). In the cattle production area, activities aimed at harmonising market mechanisms have been continued, with a view of combating black market and increasing the safety of foodstuffs. A single system of obligatory animal identification has been introduced in cattle production, as well as criteria for the classification of beef and pork products on the slaughtering line. The bulk of the state aid to agriculture is administered to the actual Law, which was amended in 2006, with the main changes relating to further restructuring of agricultural aid by strengthening the role of cattle breeding and gradual harmonisation with the Common Agricultural Policy (CAP) of the EU. A legal framework for the introduction of good agricultural and environmental practices has been created which is in line with the new CAP guidelines. The MAFWM budget is constantly increasing and for 2006 was planned at about 388 mill EUR. Out of this amount, a total of slightly more than 274 mill. EUR goes to the support schemes covered by this Law. Despites the declarative intentions regarding the re-allocation of funds, the most important item is still direct production support (about 90%, of which about 51% goes to the plant production, about 45% to the livestock and the rest for the fishery), while other programs can count on considerably smaller amounts (around 6% was allocated for rural development, mainly for investments; income support to non-commercial farms participated with about 4% - Republic of Croatia, 2006). In addition to this, the Croatian Government has developed some special programmes (relating to beef cattle and pig breeding and multi-year plantations), which are financed by loans at interest rates that are lower than market rates, granted by the Croatian Bank for Reconstruction and Development and the Croatian Agency for Small Business. These programmes are aimed at boosting the competitiveness of domestic production, particularly by increasing the production of profitable products that are in high-demand. The Ministry of Finance is responsible for aid to agriculture in the case of natural disasters. Regarding inputs, fuels used in agriculture and fisheries are exempt from excise tax. Regarding the rural development issues, at the beginning of 2006, the EC adopted a Rural Development Plan for the period , as a framework for the financing of rural development measures under the SAPARD programme. Two measures for improving the competitiveness of the sector were accredited: (i) investment in agricultural farms and (ii) investment in the processing of and trading in agricultural and fishery products. Currently, it is expected from the EC to approve the third measure under the SAPARD programme investing into rural infrastructure, while the main activities are focused on the preparation and adoption of the Agriculture and Rural Development Plan , within the Instrument for Pre-accession Assistance (IPA), component V Rural Development, as the basis for the use of the pre-accession IPA-RD funds. 3 Main problems and key challenges of the agro-food sector concerning its adaptation to the European market conditions Till the end of 1990s, there was no arranged legislative framework for implementation the agricultural policy measures in Croatia. So in 1999 the Ministry of agriculture and forestry (now MAFWM) initiated the process of creating and adopting the umbrella law the Law on agriculture, which was the first step to legally determine and arrange basic contents in 5

6 agricultural sector. After that period, numerous other laws and regulations have been adopted, directly or indirectly connected to agriculture, fishery and rural areas, trying to harmonize the system with the EU legislation. In arranging the rural development activities, in 2006 not only the SAPARD programme has been prepared, but also the Action plan for agriculture and rural areas (the Draft, prepared as a study, AFZ, 2005), in which four groups of development priorities have been determined, due to the CAP framework (development of rural economy, market accession, development of rural infrastructure and human capacities development). Due to the evaluation of European Commission regarding the Croatian progress in the process of EU accession, there are some positive movements in institutional and legislative adaptation: the Integrated Administration and Control System IACS is founded, as well as the Land Parcel Identification System LPIS, Farm register and the Farm Accountancy Data Network FADN. It is, however, estimated that considerable financial means will be required for building capacities for administration the CAP. At the normative stage, a lot has been done, but additional activities should be put into implementation of legislation and strengthening administrative capacities, especially in the field of phyto sanitary and veterinary measures, food quality and food safety. Croatian accession to the EU will undoubtedly have strong influence on Croatian agriculture. Because of the different CAP mechanisms, and even more because of Croatian incompatible agricultural statistics, these effects are very hard to estimate at this point. However, it can be supposed that the predominant influence on the structure and value of production, food prices and farmers' income will have the system of agricultural protection implemented at the moment of entering the EU. First estimations of expected benefits (EIZ,2007) show that, despite the expected agricultural protection within the current EU support models, these transition would cause decrease in production value and value added that our farmers realize under the current circumstances in Croatia. On the other hand, besides this, rather pessimistic forecast, it can be expected that EU membership will result with some additional benefits, such as market enlargement, improvement of the products' quality, more rational spending of agricultural budget, using of EU funds for restructuring the agriculture, which should result with increased competitiveness in some time. Until than, measures for stimulating competitive business should be priority within domestic agricultural policy, because this is the only was to make all these transitional shocks easier to survive. 6

7 References Agronomski fakultet Sveučilišta u Zagrebu (AFZ) (2005): Nacrt Nacionalnog programa za poljoprivredu i seoska područja Studija izrađena za Ministarstvo poljoprivrede, šumarstva i vodnoga gospodarstva RH. Agronomski fakultet, Zagreb. Bašić, F. i Franić, Ramona (2003): Nature and Man in Croatian Agriculture. In: Croatian Agriculture, Food and Food Processing Industry, 1 st edition (Maja Cvetković, ed.). Protim, Zagreb, p Ekonomski institut Zagreb (EIZ) (2007): Pristupanje Europskoj uniji: očekivani ekonomski učinci (Sandra Švaljek, ur.). Zagreb, Franić, Ramona (2006a). Politika ruralnog razvitka nova prilika za Hrvatsku. Agronomski glasnik 3(2006): Franić, Ramona (2006b): Rural areas and agriculture in Croatia. In: Croatian Agriculture, Food and Food Processing Industry, 4 th edition (Maja Cvetković, ed.). Protim, Zagreb, p Franić Ramona (2005). Subvencije u Hrvatskoj poljoprivredi i prilagodba EU. Zbornik radova Ekonomskog fakulteta u Rijeci. Časopis za ekonomsku teoriju i praksu 23(1): Franić, Ramona, Žimbrek, T., Grgić, Z. (2003): Agrarna politika u Republici Hrvatskoj na putu od poljoprivrednog do održivog ruralnog razvitka. Društvena istraživanja 12(6): Franić, Ramona; Njavro, M., Babić, Z., Kagin, J. (2006): EU Accession and Croatian Rural Competitiveness. Proceedings of the ICES 2006 International Conference of the School of Economics and Business in Sarajevo "From Transition to Sustainable Development: The Path to European Integration". Sarajevo, Bosnia and Herzegovina, October Republic of Croatia, Ministry of Agriculture, Forestry and Water Management (MAFWM) (2007). IPARD PROGRAMME Agriculture and Rural Development Plan Draft. Republic of Croatia (2006) Pre-Accession Economic Programme, Zagreb, November Available at: ( ) Republika Hrvatska, Ministarstvo poljoprivrede, šumarstva i vodnoga gospodarstva (RH- MPŠVG) (2003). Nacionalni program za poljoprivredu i seoska područja-neslužbeni DOKUMENT. Dostupno na: ( ) 7

8 Annex Table 1. Macroeconomic indicators Units Population '000 4,381 4,437 4,443 4,442 4,439 4,442 4,441 Economic growth (change in GDP) % Unemployment rate % Inflation % Share of food, beverages and tobacco in total household's expenditures* % Source: Croatian National Bank; *Croatian Bureau of Statistics (CBS) Table 2. Agricultural output Units Share of agriculture*: - in GDP % in employment % Change in volume of GAO chain indices - Total Crops Livestock Share of crop and livestock output in total GAO** - Crops % Livestock % * Together with hunting, forestry and fishing. ** Due to statistical limitations, the share of crop and livestock output is counted only for purchased agricultural products. Source: CBS 8

9 Table 3. Crops: Area and production Units Area: Total agricultural area '000 ha 2,064 2,084 2,081 2,073 1,991 1,202 - Arable land '000 ha 1,101 1,121 1,126 1,118 1, Permanent crops '000 ha Grassland '000 ha Utilised agricultural area: Total grain '000 ha Wheat '000 ha Corn/Maize '000 ha Oilseeds '000 ha Sugarbeet '000 ha Potatoes '000 ha Wine grapes '000 ha Fruit (total) '000 ha Vegetables (total) '000 ha Other (specify): '000 ha - Production: Total grain '000 t 2,768 3,394 3,720 2,661 3,178 3,025 - Wheat '000 t 1, Corn/Maize '000 t 1,526 2,212 2,502 1,569 2,100 2,207 1,935 Oilseeds '000 t Sugarbeet '000 t , ,371 1,338 1,558 Potatoes '000 t Wine grapes '000 t Fruit (total)** '000 t ** Vegetables (total)*** '000 t *** Other (specify): '000 t - * In 2005, the CBS has for the first time gathered the data concerning private family farms by using the interview method done by interviewers on a selected sample. This meant abandoning a long lasting method of collecting data by using the estimation method done by agricultural estimators on the basis of cadastre data. Due to this methodological change, there emerged significant differences in data on land areas of some crops, vineyards and orchards. They are mostly demonstrated as the reduction of land areas, which could have been caused by the tardiness of the cadastre. Therefore, 2005 data refer to land areas that are actually used, according to data obtained through the interview method on private family farms, which means the break in the long-lasting series. ** Estimation based on production of the most important continental fruits: apples, plums, sour cherries, peaches and pears (without mandarines, of which production in 2006 was 42,000 t). *** Estimation based on production of the most important vegetables: beans, cabbage, kale and tomatoes (without paprika, of which production in 2006 was 46,000 t). Source: CBS. 9

10 Table 4. Livestock and livestock products: Herd size and production Units Herd size: Cattle ' Cows ' Pigs ' Sheep/Goats ' Production (increase): Beef & Veal '000 t Pigmeat '000 t Sheepmeat '000 t Poultrymeat '000 t Eggs Mill Milk Mill. l Source: CBS, for 2006: Croatian Chamber of Economy (CCE) Table 5. Agricultural prices Units Wheat EUR/t Corn/Maize EUR/t Oilseeds EUR/t Sugarbeet EUR/t Potatoes EUR/t Wine grapes EUR/t Other (specify): EUR/t - apples for consumption EUR/t wine (table and quality) EUR/100 litres Beef EUR/t 1, , , , , ,881.1 Pigmeat EUR/t 1, , , , , ,424.3 Sheepmeat EUR/t 2, , , , ,104.5 Poultrymeat EUR/t 1, , , , , ,083.8 Eggs EUR/000p Milk EUR/t Source: Own calculation based on CBS 10

11 Table 6. Farm structure Units 2003 Agricultural holdings No 448, <2 No 299, < 5 No 85, < 10 No 42, < 20 No 15,628 >20 No 5,250 Agricultural area 'ha 1,161, <2 'ha 185, < 5 'ha 276, < 10 'ha 293, < 20 'ha 208,338 >20 'ha 199,466 Average size 'ha/farm 2.6 Source: Agricultural Census, 2003 Table 7. Agro-food trade Units * Agro-food trade Mill. EUR Agro-food exports Mill. EUR Agro-food imports Mill. EUR , , , , ,495.5 Agro-food trade balance Mill. EUR Share of agro-food trade in: - Total exports % Total imports % * Estimation according to CCE Source: CBS 11

12 Table 8. Agro-food exports by commodity group Thous. USD Live animals 4, Meat and edible meat offal 14, Fish and crustaceans, molluscs and other aquatic invertebrates 145, Dairy produce, eggs, natural honey 38, Other products of animal origin 2, Live plants and floricultural products 1, Edible vegetables, plants, roots, tubers 5, Edible fruit and nuts, peel of citrus fruit or melons 13, Coffee, tea, mate, spices 5, Cereals 45, Products of the milling industry, malt, starches 11, Oilseeds, oleaginous fruits 18, Lac, gums, resins, other vegetable saps and extracts Vegetable plaiting materials, other products of vegetable origin Animal or vegetable fats and oils 25, Meat preparations 50, Sugars and sugar confectionary 207, Cocoa and cocoa preparations 146, Preparations of cereals, flour or starch 52, Preparations of vegetables, fruit or nuts 20, Miscellaneous edible preparations 151, Beverages, spirits and vinegar 85, Residues and waste from the food industries / Food prepared for animals 30, Tobacco and manufactured tobacco substitutes 113, Total agricultural products 1,190,318 Source: CCE 12

13 Table 9. Agro-food imports by commodity group Thous. USD Live animals 134, Meat and edible meat offal 140, Fish and crustaceans, molluscs and other aquatic invertebrates 85, Dairy produce, eggs, natural honey 79, Other products of animal origin 8, Live plants and floricultural products 38, Edible vegetables, plants, roots, tubers 72, Edible fruit and nuts, peel of citrus fruit or melons 122, Coffee, tea, mate, spices 54, Cereals 23, Products of the milling industry, malt, starches 17, Oilseeds, oleaginous fruits 59, Lac, gums, resins, other vegetable saps and extracts 4, Vegetable plaiting materials, other products of vegetable origin Animal or vegetable fats and oils 57, Meat preparations 48, Sugars and sugar confectionary 217, Cocoa and cocoa preparations 71, Preparations of cereals, flour or starch 128, Preparations of vegetables, fruit or nuts 95, Miscellaneous edible preparations 137, Beverages, spirits and vinegar 106, Residues and waste from the food industries/ Food prepared for animals 110, Tobacco and manufactured tobacco substitutes 34, Total agricultural products 1,847,682 Source: same as in Table 8 13

14 Table 10. Regional breakdown of agro-food trade Units 2006 Export EU-27, EU-25 and EU-15 - Slovenia Austria % Hungary % Poland % Check Republic % Slovak Republic % Romania % 1.3 EU-12 - Italy % Germany 6.5 Western Bakan - Bosnia and Herzegovina % Srbia + Montenegro % Macedonia % 2.0 Other - Japan % USA % Russia % 1.0 EU-27, EU-25 and EU-15 - Austria % Hungary % Slovenia % Poland % Romania % Check Republic % 2.4 EU-12 - Italy % Germany % The Netherland % Spain % France % Denmark % 1.7 Western Balkan - Bosnia and Herzegovina Srbia + Montenegro 1.9 Other - Brasil 6.4 Source: CCE 14

15 Table 11. Agricultural policy measures Market-price policy measures Market support measures - administrative price control Guaranteed prices for wheat - border protection Yes, according to trade agreements - export subsidies No - intervention system (buying-in, storage ) Yes Production support measures - payments based on output (price aids) Only for milk and extra virgin olive oil - payments based on area planted/animal numbers Yes, for a great number of products Input subsidies Fuels exempt from excise tax Income support measures - decoupled direct payments Yes - other (natural disaster payments, compensation payments) Yes 2. Structural and rural development measures Compensatory allowances for agricultural producers - support for less favourable areas Yes Not directly, only through higher amounts for organic - agro-environmental payments production - other Measures to support restructuring and increase competitiveness - farm investment support Yes - food industry restructuring support Yes - support for infrastructure related to agriculture Yes Marketing preparation of agricultural products, protected Other measures to support rural development breeds, etc. 3. General services for agriculture Extension service Yes Professional services (i.e. breeding control, selection ) Yes Research, training and related infrastructure Yes 15

16 Table 12. Budgetary transfers to agro-food sector in 2005 Type of support Thous. EUR 1. Production incentives total 265,050 a. Plant production 136,493 - arable crops (per ha) 118,091 - vineyards (foundation, annual payments) 7,915 - fruits (foundation, annual payments) 4,432 - olives (foundation, processing, oil prod.) 5,101 b. Grasslands 184 c. Livestock production 120,295 - cattle production (cow milk, fattening, breeding) 98,913 - pig production (fattening, breeding) 7,469 - sheep and goat production (milk, breeding) 10,276 - horse breeding livestock selection 1, Income support 9, Capital investments 13, Rural development 1, Insurance 2, Interventions (purchase, storage) 6,119 Agricultural Extension Service 4,308 Total transfers to agro-food sector as share of total budgetary expenditure % as share of GDP % 1.10 Source: MAFWM and MFIN 16