As has been pointed out, the US and the EU share many of the same concerns when formulating rural policy. The principal difference is that by giving agriculture an explicit role in promoting the objectives of rural development, the EU has sought to promote greater coherence between agricultural and rural policy and thus mitigate some of the adverse impacts on rural communities. Since the US is facing many of the same rural issues, it is worth asking if there are lessons to be learned from the EU experience.
To answer this, it must first be asked whether Pillar II programmes have been successful in addressing the problems of rural areas. Since these programmes have only
been in effect for a few years, it is too early to do any rigorous evaluation of the success of the EU initiatives. Such an evaluation would require answers to the following questions:
1. Are the EU reforms more likely to increase the entrepreneurial dynamism of the
farm sector? In other words, do the new policies encourage farmers to use their farms to exploit emerging market opportunities rather than as a producer of programme commodities and as a conduit for subsidies? Diversification would be one indicator, along with: a switch to non-traditional crops or produce; an increasing share of short channel sales to local markets or restaurants; agri-tourism or other non-commodity farm products, direct involvement in value-added enterprises beyond merely providing inputs, etc. From the community perspective, farmer involvement in LEADER initiatives or other efforts in development planning would be a good indicator.
2. Are the EU reforms likely to increase the quality and value of custodial functions in the farm sector? Two concerns come to mind. Without significant private-sector competition, large government outlays for caretaker functions may become inefficient. In addition, in the longer term the policy may be less effective in guaranteeing these benefits as financial incentives substitute for social norms governing farming practice.
3. Are new EU policies more likely than previous policies to raise rural living standards and reduce rural/urban income disparities? This leads to the bigger question of whether large outlays on agriculture can have a substantial impact on rural development given its small share of the rural economy. This is especially relevant in light of EU enlargement. All the new member states (with the exception of Slovenia) have a per capita GDP of less than 75% of the EU average and thus qualify for EU structural and cohesion funds. Some regions in the former EU15 will no longer qualify as Objective 1 regions, and funds under Pillar II of the CAP will be the only instrument for rural development available to them.
4. Trade-offs: Can the EU pursue its goal of sustainable agricultural development while also raising competitiveness? A move towards sustainable production practices could slow yield growth, and new requirements regarding quality and environmental stewardship could raise production costs. Will EU farms be competitive if production and export subsidies are reduced? Or will the result be a two-track European agriculture, split between large, industrial-scale farms and small “boutique” operations?
However, even without knowing the ultimate success of CAP Pillar II programmes, the EU experience suggests some new dimensions that could be added to the US policy debate.
The 2003 CAP reforms raise the question of whether some forms of farm support in the US can be evaluated on the basis of their contribution to meeting rural development objectives. The incidental rural development benefits associated with agri-environmental programmes in the US have been noted above. Clearly, a substantive debate on this issue would do more than merely append rural development objectives to any programmes found to have incidental benefits. The more productive policy debate would examine the design of these programmes and propose alternatives for maximising multiple objectives.
188 – Part IV. Agricultural Policies and Rural Development: Country Experiences
COHERENCE OF AGRICULTURAL AND RURAL DEVELOPMENT POLICIES – ISBN-92-64-02388-7 © OECD 2006 Similarly, the menu approach used in the CAP’s second pillar provides a real-world example of the devolution of some farm programmes that could give support to proposals for the devolution of US farm support (Gundersen, et al., 2004). Both the EU and the US recognise that the great diversity of rural areas requires that local solutions are devised to meet rural development challenges. This thinking has not extended to farm policy in the US, despite the great diversity in farming across states. As in the EU, the decision to link some forms of farm support to rural development objectives would likely require greater regional flexibility than is provided under current US Federal farm programmes. Whether increased flexibility in enabling farming’s contribution to rural development would be better achieved using broad directives, as is the case in the EU, or through more decentralised instruments, such as block grants to state governments, would provide another productive area for debate.
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