Harnessing multifunctionality to rural development

Concepts of Multifunctional Agriculture, have become important in the debate about agri-food in the EU over a number of years leading up to the end of the 1990’s and beyond, and have been accompanied by the intrusion of wider sets of concerns into agri-food and trade policy. As a productivist agricultural paradigm has given ground to a post-productivist conceptualization, so too has the dominance of producer and trade interests retreated somewhat in favour of consumer and environmental actors. A multifunctional conceptualization places the agri-food system in a more dynamic and diverse policy environment, although it is itself subject to different definitions and understandings of what it encompasses and entails (Wilson, 2007).

Much of the debate about what Multifunctionality means and how it may be developed makes reference to the distinction drawn by the OECD (2001) between a positive and a normative approach: the first based on joint production of commodity and non-commodity outputs of agriculture whilst the latter sees multifunctionality as having value in itself and relates to social concerns with agriculture. This distinction creates different policy responses (Potter, 2006): the former approach achievable through policies aligned directly with farming activity, while the normative approach may allow for policies that are directed at non-farming activities and non-farmers. EU policy, as it emerges through the reform of CAP, may be seen to have allowed for a mix of approaches following from a set of measures that promote the normative approach as the focus of CAP reform is moved toward the increased importance of Rural Development.

As many commentators have observed2 concepts of Multifunctional Agriculture can be seen to have contributed to the process of CAP reform through the 1990’s to the Agenda 2000 reforms and the creation of the Rural Development Regulation (RDR) that constitutes the so-called Pillar II of the CAP. The RDR associates rural development more directly with agricultural policy by the creation of Rural Development Plans (RDPs), which are designed in part to encompass the multifunctional influences on, and contributions of agriculture to the rural economy (Dwyer et al, 2007).

The 2003 Mid-term review of the CAP reform process begun by Agenda 2000 brought further change to Pillar I measures in addition to enhancements of Pillar II. Agenda 2000 and the Mid-term reforms of 2003 aimed to consolidate measures and to simplify the administration of rural development policy with the intention of making it more efficient and coherent. The major changes to Pillar I saw the introduction of the Single Payment Schemes (SPS) that weakened the direct linkage of support payment to production. The SPS also have cross-compliance conditions attached to ensure that land is maintained in ‘good agricultural order’, and supports ‘good agricultural practices’, which include soil

conservation and pollution reduction measures (EC, 2003a). The cross-compliance conditions for Pillar I support agricultural multifunctionality (‘positive’ in OECD terms), which may be contrasted to the rural development multifunctionality of Pillar II, provided through direct support of activities that relate to environmental and social impacts of agriculture, and also to support rural enterprises that may not be directly associated with farms and farming, and towards which the focus of CAP reforms has moved3 (EC, 2004).

The overall strategic basis of the RDR is to achieve a balance between policies that reflects the economic, social and environmental situation and needs in each country, and structured so as to support three main objectives of the regulation (see Community Strategic Guidelines in EC, 2006), namely

ƒ Improvement to the competitiveness of agriculture and forestry through restructuring, development and innovation

ƒ Protection of the environment and countryside by land management practices

ƒ Safeguarding and improving the quality of life in rural areas and encouraging the diversification of economic activity

These three objectives are allocated to the first three of four so-called Axes along which Member States organise their Rural Development Plans; the fourth Axis being a partnership approach for Axes 1-3 based on the experience of LEADER projects. RDPs are designed to strengthen the partnership approach through close consultation of regional, local and other public authorities as well as NGO and other parts of civil society (EC 2004).

In a review of these aims the ‘Health Check’ consultation process launched in 2007 by the EC (EC, 2007a) examines the major reforms of the CAP to date including the SPS and its implementations; the effectiveness of the Cross-Compliance tests in Pillar I; the remaining partial coupling of subsidy to production and its gradual elimination; upper limits in direct payments; the abolition of Set-Aside; and the relaxation of dairy production quota limits with a view to final elimination (see Box 1). This reform pathway continues with prospective rounds of policy changes leading up to 2013 and the prospect of greater, or even of the final, decoupling of agricultural subsidies and production.

3

It may be worth noting that the vast majority of CAP funds are still allocated to Pillar I. The overall European funding available for the second pillar was about 46 billion Euro (1999 prices) equal to less than 5% of the EU overall budget and to about 10% of the EU expenditure for agriculture compared with about 275 billion Euro for the first pillar, amounting to 40% of the total EU expenditure (OECD, 2005)

Box 1: Major features of the Health Check Consultation

ƒ Single Payment Scheme and its implementation. The Historic model and the Regional model of payments may both be adjusted to accommodate perceived weaknesses in each particularly the progressively distant and less relevant reference period for the Historic model c.f. the inflexibility seen in the Regional model. The consultation, therefore, looks to simplification of the SPS and towards a flatter rate of payments among farmers within regions of the EU

ƒ Cross-compliance (in Pillar I) has contributed to increasing farmers’ awareness of existing obligations, but adjustment may be possible to make it more effective

ƒ Remaining partial coupling and its gradual elimination. Decoupling introduces greater flexibility for the farmer, where output is more adapted to the market

ƒ Regional variations in the impact of further decoupling should be taken into account and addressed through Rural Development instruments, and some coupled payments may still be continued where there are few economic alternatives

ƒ Upper limits in direct payments (capping of payments) to address imbalances such as 20% of beneficiaries receiving 80% of direct payments, with progressive capping and minimum area requirements and /or minimum annual payment also considered

ƒ Abolition of Set-aside: to take advantage of higher world prices and reduce administrative burdens, but also need to maintain ways to preserve the environmental benefits of set-aside

ƒ Dairy Quota: seen to hamper the sector from benefiting from stronger (world) demand and higher prices. Suggestions include gradual increase in quotas until phasing out becomes the best option

(Adapted from: EC, 2007a)

The direction of policy is toward the increasing influence of the market on farmers’ decision making and toward a reduction in their dependence on state aid. As a corollary farmers who are still receiving coupled aid4 are seen to be less oriented to the markets. But with decoupling the farmer faces increased risks, becoming more sensitive to the variation of input and/or output prices and shifts in patterns of demand. These changes, however, are not experienced equally across the agricultural sector nor across the territory of the European Union as different agricultural sectors and different regions have always been subject to differing levels of subsidy support and are, therefore, differently equipped to deal with the new demands of policy and of the market. The central implication of the shift in policy is to encourage farmers to become more independent and to develop their business skills and, in order to be more capable of managing their businesses in a more uncertain and challenging market and regulatory environment, to develop a more entrepreneurial attitude to their businesses.

7.3

Farmer behaviour and the uneven distributions of farmers’