23 April 1997 • Austrian Agriculture under EU Conditions • Matthias Schneider

Agriculture and parts of the food industry have been considered sensitive areas with regard to EU integration. Now, however, a study by the Austrian Institute of Economic Research shows that the fundamental change in the agricultural regime has been accomplished without major disorders. Serious market disruptions have not materialized; income in agriculture showed a positive development in the first year of EU membership. Generous public assistance facilitated the transition.

Agricultural prices dropped in the wake of EU membership by 22 percent on average. The resettling fall in revenues was more or less offset by much higher direct payments to farmers. The development was particularly favorable in the "core" of Austria's agriculture, farms run by full-time farmers and larger farms run by part-time farmers. Against the background of the good results for agriculture in 1994, this is a remarkable achievement of agricultural policy.

The adoption of the Common Agricultural Policy has made the dependence of agriculture on the public funds more transparent than before. The direct payments to farmers in 1995, worth some ATS 25 billion, amounted to about half of the value of final output. The scheduled stepwise reduction in the assistance to agriculture will depress incomes of farmers over the next few years.

The opening of the Austrian market to foreign competition stimulated trade in agricultural products between Austria and the enlarged European Community. Imports increased, but the agricultural markets did not suffer from grave distortions. Exports also rose. There is a lack of reliable data. The food industry maintains that the loss in domestic markets brought about by integration exceeds the gains achieved in the export business. The situation varies by branch and by enterprise; there are losers, but also clear winners.

The new environmental program in agriculture which was initiated when Austria joined the EU is noteworthy. The bundle of policy measures contained in this program to encourage ecological land management and the maintenance of the natural lebensraum has been very well accepted by farmers. About 70 percent of all farms participate in this program which covers 78 percent of the total area under cultivation. Thus, Austria's rate of participation far exceeds that in other EU countries. In recognition of Austria's efforts to achieve a comprehensive ecological orientation of agriculture, the EU raised its financial contribution to the costs of this program (1995 ATS 7.3 billion).

Austria's accession to the EU has revealed a backlog in structural adjustment in agriculture and the food industry. The intensification of competition has tended to break down structures that had remained rigid over many decades. This is an important aspect of the achievements brought about by integration.

The future development of Austria's agriculture within the framework of the Common Agricultural Policy will depend primarily on the performance in the markets. A more ecological orientation of CAP and the integrated support concepts for the rural areas now under discussion in the EU will benefit Austria's agriculture.