Begegnungen
Schriftenreihe des Europa Institutes Budapest, Band 28:73–79.

NÁNDOR SCHÜTZ

The Impact of Romania’s and Bulgaria’s Accession to the European Union on Their Agricultural Economy

On 1 January 2007 two candidate countries, Romania and Bulgaria are to join the European Union, where agriculture plays a far more significant role in the economy than in the EU–10 or in the EU–15. The proportion of people employed in agriculture is 26% in Bulgaria and 32% in Romania, and the share of agriculture in the GDP is 12% in both countries. In Romania the agricultural area of the country is 14 million hectares, covering 59% of its total territory, and this would make it the seventh largest country of the Union, and the second biggest maize producer next only to France. Bulgaria’s agricultural area is 5.3 million hectares, which is 48% of its entire territory. A characteristic feature of both countries is to have fragmented holdings, the proportion of registered producers is modest compared to the number of landowners and non-market producers, and the same tendency is prevalent in Hungary, too. Agriculture is short of capital and its development requires resources.

Agriculture had been one of the decisive branches of the national economy in Romania and Bulgaria, and though its role has been declining as a natural corollary of socio-economic development, its significance cannot be challenged even today. This fact does not only assert itself in the economic area but also in social, sociological and political respects.

Where does the preparedness of Bulgaria and Romania stand today for European Union membership?

Comprehensive Monitoring Report on Bulgaria’s and Romania’s Progress towards Accession, 25 October 2005

Economic criteria

According to the assessment of the European Commission both countries meet the criteria of a functioning market economy. As regards the precondition whether they would be able to cope with the pressure caused by competition within the Union, the European Commission has stated that “the continuation of the current pace of its reform path should enable Bulgaria” and a “vigorous implementation of its structural reform programme” should enable Romania “to cope with competitive pressure and market forces within the EU”.

Issues requiring enhanced efforts

In the field of agriculture Bulgaria and Romania have to accelerate their preparations for integration into the organisations of the Single Market and for the mechanisms of foreign trade entering into force.

Areas of serious concern

Both Bulgaria and Romania have to make enhanced efforts to establish the necessary institutions and to provide them with the expert personnel required for their operation. This is a basic criterion to the payment of direct allocations, market support and reimbursements to the agricultural producers and to funds meant for rural development. It is of serious concern that the paying agencies and the Integrated Administrative and Control System (including the Land Parcel Information System /LPIS/ and the direct payment scheme to farmers) will not be fully operational by the time of accession. In case this is not solved they risk their citizens not having access to the funds of the common agricultural policy.

In both countries the veterinary legislation has to be passed and implemented urgently. Problems in this field endanger the internal market integration of animal husbandry in both countries: if these are not solved they may undermine the veterinary health system of the EU and the safety of the food chain. Progress has been particularly insufficient in the organisation of the animals identification and registration system, as well as in the development of a comprehensive veterinary inspection system of imports from third countries. The implementation of the requirements related to transmissible spongiform encephalopathy (TSEs) such as BSE, for instance, is subject to serious concern in both countries. Protection against animal diseases is of low standard in Bulgaria as well as in Romania. Separate measures may be required because of the danger of potential epidemics in order to protect other parts of the EU from diseases. There is no sufficient capacity available for the treatment of animal waste either. It is characteristic of both countries that the current pace of the modernisation of agrarian and food industry establishments would not make it possible for all of them to meet the obligations set during the course of accession negotiations. Individual measures will be introduced in the interest of public health concerning producers who do not meet the requirements, among others restrictions will be introduced for the production and sale of their goods.

Bulgaria

More than 95% of the almost ninety thousand-page material of the acquis has been translated into Bulgarian. About 60% of the translations will have to be checked by the national authorities before they could be submitted to the EU.

The country has not made satisfactory progress in the organisation of dairy products market, which could hinder the EU’s market interference into that branch, unless these shortcomings are overcome on time. The Community regulations for the trade in livestock and animal products have not been adapted, and regulations concerning animal welfare have not been fully implemented on the level of agricultural holdings, in transport and in slaughterhouses. Bulgaria has to set up new veterinary border cross points (in 2006 the building of seven new ones commenced, and should be completed by late October, apart from these only one cross point is ready at the Turkish border).

Romania

In Romania almost 60% of the acquis has been translated, but more than half of it is still to be checked.

Romania has to make significant efforts to pursue the reform of public administration, particularly to increase the expertise of public services and it has to supply proper personnel and financing to the application and implementation of the EU regulations.

Romania has to make efforts to set up payment agencies and also to build an integrated system of administration and control. (The tender for IT development was announced on 10 April 2006.) Veterinary stations will have to be built at the border cross points.

Measures to be taken by Bulgaria and Romania

Both countries will have to pay attention to the strengthening of their administrative and legal capacity to become capable of adequately implementing and monitoring the prescribed legal norms.

If we recall the last country reports on Hungary and our efforts made directly before and after our accession in order to meet the necessary conditions, to set up and operate the required institutions and systems, this situation seems familiar to us. Just as in the case of other acceding countries, the road we had to cover was not simple either.

The European Commission would publish its next report on 16 May 2006.

Accession Treaty

Transitory measures – agriculture

• Both countries. For seven years from the date of accession both countries may retain the restrictions on purchases as stipulated by its valid legal norms concerning agricultural land, forests and areas covered by forests.

• Bulgaria. Requirements concerning the fat content of milk need not be applied for consumer milk produced in Bulgaria up to 30 April 2009, in so far as it extends over the full category of the 3% fat content milk is sold in the whole-milk category and the 2% fat content milk is sold in the semi-skimmed milk category. Consumer milk not meeting the requirements of fat content can be exclusively on sale in Bulgaria or can be exported to third countries. Establishments in the dairy industry may receive fresh milk supplies not meeting the Union requirements up to 31 December 2009.

• Romania. Romania may acknowledge replanting rights obtained from the grubbing-up of hybrid varieties that may not be included in the classification of vine varieties, cultivated on an area of 30 thousand hectares These replanting rights – may only be used until 31 May 2014, and exclusively for planting with Vitis vinifera. The restructuring and conversion of these vineyards will not be eligible for Community support provided for under Article 13 of Regulation (EC) No. 1493/1999. However, national state aid may be given for the costs resulting from their restructuring and conversion. Such aid may not exceed 75% of all costs per vineyard.

A departure from the special hygienic rules of food stuff of animal origin can be permitted up to 31 December 2009 (26 meat processing factories + slaughterhouses, 28 dairies).

It is compulsory to adjust the animal farms and the quality requirements of raw milk to the Union standard up to 31 December 2009.

The use of some herbicides is permitted up to 31 December 2009, with the exception of the 2.4–D for which the deadline is 31 December 2008 as latest.

Support

• Direct payments. Similarly to the case of the countries that acceded in 2004, the introduction of direct Union support would be gradual in Romania and in Bulgaria too. In 2007, the year of accession the farmers would get 25% of the direct support level. Community financing would grow by 5% annually in the first five years after accession, next it would grow by 10% annually until it reaches 100% (in 2016).

As in the case of the countries that acceded in 2004, the EU resources can be supplemented by support from national resources up to its 30%, to reach 100% at the most.

In view of the fact that the reference yields acknowledged for grain are low, both Bulgaria and Romania would get a significantly lower per hectare support than the big grain producers of Western Europe or Hungary. On the other hand, the direct payments for grain would reach 70–80% of the total payments in this field.

• Rural development. In the case of Romania and Bulgaria these resources would be higher than the Union resources arriving there by direct payments and measures in the agricultural market. This can be traced back to a large extent to the proportionately smaller direct support. In view of the questions still open in the Union budget for 2007–2013, the exact dimension of support for rural development is not yet known.

• Sums earmarked for temporary supplementary measures for rural development to be granted to Bulgaria and Romania

1. Annually 1000 euros per unit supporting the semi-subsistence farms.

2. Supporting producer groups by 100 thousand euros in the first and second years, 80 thousand euros for the third year, 60 thousand euros for the fourth year and 50 thousand euros for the fifth year.

Chances of Accession and Its Impact

There are a number of factors that could cause transitory difficulties after the accession: catching up may be affected by a delayed support policy outlined in the Accession Treaty similarly to the new member states having acceded in 2004, with growing competition as one of its results, the priority system of the common agricultural policy not supporting pork- and poultry sectors, and the basic right to the free movement of workers introduced with certain spatial and time-wise limitations.

Accession to the EU would place the ’domestic’ Bulgarian and Romanian food market into a new dimension. The traditional elements of market protection measures (customs, quotas with reduced customs tariffs providing access to the market, and special market-safeguard measures) cannot be applied in the single internal market of the EU, therefore accession to the Community as well as the superior power of the commercial chains would result in a sharper competition and a growing pressure of import.

The extension of the Common Agricultural Policy to the Bulgarian and Romanian agriculture, the differences of the two sets of preferences, namely the priority system of the CAP not preferring pork- and poultry sectors, would lead to significant structural transformation and shift in the structure of production.

Expected advantages and effects

– The two countries would become the beneficiaries of the Common Agricultural Policy of the EU by their accession. Their producers may avail themselves of the direct land-based support, and may become beneficiaries of the support constructions registered in the Structural and Rural Development Funds of the EU within the framework of co-financed support measures. Producers can have access to significantly larger Union grants than in the previous years, right from the first year of accession.

– From the first moment of accession the Bulgarian and Romanian agricultural producers would also be covered by the measures protecting the internal market of the European Community as well as those promoting export to a third market.

– Accession would create a continuous expansion of resources during the transitory period, and would produce an investment milieu that is more favourable than the current one. The agricultural policy and market regulatory system of the EU would build a stability factor into agricultural production even after transformation that would by itself improve the competitiveness of Bulgarian and Romanian products.

– Not every branch and farm sets out with equal opportunities in this competition. The agricultural support system of the EU may launch a significant rearrangement of incomes after the accession. Entitlements for support would provoke the shrinking of certain branches and cultures. As a result of this process animal husbandry is expected to lose to the benefit of grain production, and as a result plant production may become over-emphasized compared to animal husbandry.

– Based on Hungarian experiences, the import of foodstuffs may speed up, while the growth of exports may lag behind.

– Depending on the degree of the vertical co-operation of production and on the extent of the development of logistics systems in commerce, the reaction ability of agriculture in international competition may face difficulties in the initial phase after the accession.

– It should also be kept in mind that goods of lower quality than the Union average, produced at a higher cost than by the competitors in the Union may even be squeezed out of their domestic market. It may result in significantly reduced production particularly in the so-called sensitive sectors such as pork, chicken and milk, and consequently in the growth of employment and existential problems.

– The lack of the promotion of producers’ interests in the face of the multinational commercial companies of solid capital is a tremendous problem even in the European Union. The fragmented producers’ background and the lack of a strong and united system of interest representation mean a particularly vigorous source of tension; the producers in certain branches are basically exposed to commerce.

– Certain national support constructions may be maintained even after the accession, which are aimed at handling special problems emerging in areas not regulated by the EU, or serve an early alignment of agriculture to the Community market.

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Despite the transitory difficulties of alignment the Bulgarian and Romanian agricultural economy would get into a more favourable position by the accession. It can have access to opportunities better than ever by the direct and co-financed support of the European Union and by the predictable market conditions as well as the stable background of the Union’s institutional system. The favourable image is further improved by the system of national supplementary assistance, for the income-generating conditions of production can be significantly improved by such national additions to the direct grants, helping the farmers in coping with fierce competition.

In the future the major decisions concerning agricultural policy would be made by the EU Council of Agriculture Ministers. It, however, does not mean that a national agricultural policy, the assertion and presentation of the country’s interests are to be given up.

Accession to the Union revaluates a significant part of agricultural production, and ensures the achievement of predictable and in many cases higher prices. Prices and support jointly offer a chance to the Bulgarian and Romanian agriculture to set out to development reaping a lasting qualitative change.