Romanian farm support: has European Union membership made a difference?

Hubbard, Carmen and Luca, Lucian and Luca, Mihaela and Alexandri, Cecilia (2014): Romanian farm support: has European Union membership made a difference? Studies in Agricultural Economics, 116 (2). pp. 100-106. ISSN 2063 0476

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Abstract

This paper provides an insight into the major policy measures that influenced Romanian agriculture before and after the country’s accession to the European Union (EU) in January 2007. It analyses the volume and composition of national and EU agricultural financial support between 2002 and 2012, and assesses how much has been transferred between agricultural farm support (Pillar 1) and rural development (Pillar 2). The findings show that, as membership drew near, Romania increased its efforts to provide farm support. The level of support has continued to rise (in nominal terms) year on year, from EUR 242 million in 2002 to almost EUR 600 million in 2005. By 2007, over EUR 1 billion (10 per cent of the Gross Value Added of the sector) was allocated to agriculture. Moreover, preparation for accession meant also significant changes in the structure of subsidies. This was redesigned so to emulate the Common Agricultural Policy, shifting the emphasis of support on to direct farm income. Overall, Romanian agriculture benefited from EUR 16.4 billion in subsidies between 2002 and 2012, of which almost half (EUR 7.8 billion) came from the EU. With accession, the share of EU financial support has increased, particularly in the form of direct payments, whilst the national contribution has decreased. However, the latter remains much higher than prior to accession. Of EUR 13.6 billion allocated for agriculture following EU accession (2007-2012), 46 per cent was funded from the national budget. Overall, there is a rather limited volume of investment subsidies, as compared to production and income support, which may partially explain the low economic performance of the sector. EU membership has not necessarily led to farm consolidation and a gradual disappearance of small-scale (semi-subsistence) farms, which remain a dominant characteristic of Romanian agriculture.

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