New government positions in Brussels, which began with adjustments to federal policies, came about in response to the profoundly novel regional and agricultural challenges thrown up by unification and its aftermath. In each case, the eastern Land governments were at the forefront of pressure for changes in federal policy, and were able to utilize the access and information granted them under formal policymaking arrangements at the national and supranational levels to good effect (Loehnis and de la Dehesa, 83).
In others it developed more quickly and completely because of the temperament of agreements hit when the Communities were forged and because of the interests of powerful member states. The establishment of the ECSC and the successful policy integration in these industrial sectors so vital for the economies of the 1950s resulted from a coincidence of member state interests and skillful institution building.
The organization of the Euratom and the EEC in 1958 led to further projects for common decision making. Central to the goal of forging an ever closer union among the people of Europe was the idea of an enmeshing of member state economies, in large part through the instrumentality of trade (Clout, 16). Thus came about the establishment of a customs union for intra-EEC trade in all industrial goods. This feature of the nascent Community was evidently of benefit to West Germany.
With reverence to underlying, the organization of the EEC was one connecting the two most powerful founding member states, France and West Germany, whereby France, because of her large, and, in the European context, comparatively efficient agricultural sector, was accorded a general agricultural policy in return for the creation of a customs union for trade in all goods that was in the interest of the FRG, the budding Communitys most efficient industrial economy. Indeed, it became normal to refer to the European enterprise as a customs union with an agricultural guiding principle.
The Common Agricultural Policy (CAP) replaced member states farm policies. Implemented to increase efficiency and productivity in the agricultural sector, to help bring about stable food prices, and to provide a secure supply of high quality foodstuff for the Community citizens, another objective, the maintenance of a fair standard of living for those gaining their livelihood in the industry, became preeminent. Agricultural goods are traded freely within the Community and policy decisions, including those on agricultural prices, are made in Brussels. The CAP consists of a structural fund that is intended to support financially modernization of agriculture.
To realize the CAPS main objective and thus to maintain prices at levels that result in acceptable incomes for member state farmers, a levy is placed on agricultural imports form third countries. Locally, agricultural supplies are purchased into intervention once their price falls under a certain level. Because of the tendency for protectionist practices to lead to increased production, the CAP has often in the past led to huge oversupplies of such commodities as grains, meat, milk products, and wine, which have been bought up and stored at great cost so as not to depress prices. Exports of these high priced commodities are subsidized, again at great expense.
These export subsidies have guided EUs trading partners to accuse Europe of dumping these commodities and have even been the cause of major trade disputes with them over the years. The cost of the CAP reached 70 percent of the Communitys budget at times in the past. In recent years, measures have been implemented to reduce production of commodities in surplus supply, with the result that farm expenditures will gradually decline, and the EUs trade officials have been able to convince her trade partners that decreased production will gradually lead to a less prominent role for EU farm products on international markets (Harris et al., 325).
Germanys interests, on the whole, have not been well served by the CAP. Internationally, she is interested in peaceful economic relations in her role as one of the great trading nations of the world and the disruptions caused by disputes between the EC/EU and its trading partners over agricultural trade have not provided her well. As a highly industrialized country with a small agricultural sector and as a large net importer of foodstuffs, the high price European food policy is not in her national interest. Germanys donations to the CAP amounted in 1993 to about 30 percent of total expenditures whereas receipts flowing to Germany amounted to only half that amount (Black, 323). And yet her agricultural ministers have often supported high prices in Brussels.
This anomaly can be explained not so much by German governments generally pro-integration attitude (although German governments know that a price has to be paid for European cooperation) as it can by domestic politics. Despite the small number of farmers, the agricultural sector is highly organized and dominant politically. In addition to this, public opinion is likely to be supportive of protecting the economic and social viability of rural areas and maintaining agricultural land in production. The CAPs amplified importance on environmental concerns has helped to make it more pleasant to the ecologically cognizant German public.
Unification has led to some extent increased importance of the CAP for Germany. Eastern Germany has in the past had excessively large agricultural sector, and the GDR had a large agricultural workforce of 800,000 as well as two times as much farm land per capita as West Germany. Because of its low productivity, GDR agriculture was extremely supported financially.
It was severely challenged by the transition to the market economy after unification, and by 1994 the agricultural workforce in the five new Laˆnder had been reduced to 224,000. CAP funds contributed importantly in the adjustment to more efficient production and laying fallow of some 17 percent of farmland there. But even with the added CAP funds flowing to her as a result of the disproportionately large agricultural sector in the new Laˆnder, Germany still supply in a major way to the Communitys agricultural funds or treasury (Karcz, 227).
With the ongoing rationalization in a sector that has lost 3.2 million jobs. And this took place in the years from 1960 to 1992, and in which a farmer who could generate enough harvest for ten people in 1950 can now provide for 80, political clout of farmers is in unremitting decline. Such rationalization is taking place apace at the European level, and the forces of free trade and globalization at the broader international level will ensure that one of the most prominent EU policies will reduce in significance as the Union is forced to adjust its very expensive and relatively inefficient subsidization policies (Dent, 162).
With its decline in importance, the CAP will be less of a drain on German finances, but it will become controversial again if the Union decides to permit the attainment of Central and East European states such as Poland, Hungary, the Czech Republic, and Slovakia, all countries in which inefficient agriculture employs a much greater fraction of the workforce than the EU average, and where implementation of the CAP would be hugely expensive. Germany, positively in the direction of eastward development of the EU would then give a high percentage of the ensuing costs. For this reason, Germanys outlook in the direction of the CAP is expected to be critical in this significant judgment or decision also.
Both the European Community and its member governments administer programs designed to achieve a spatially balanced pattern of economic development. Typically, these programs designate assisted areas within which applicants are eligible for capital grants, soft loans, accelerated depreciation allowances, and tax concessions for business, as well as job training for workers and infrastructure grants to municipalities. There existed three main programs at the European level prior to Maastricht, which together constituted the EC structural funds: the European Regional Development Fund (ERDF), the European Social Fund (ESF), and the Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (Adams, 101).
In West Germany, federal regional policy tackled two types of problem region: underdeveloped rural areas, and areas vulnerable to or suffering from the decline of a dominant industry. Administratively, the program was accomplished as a joint task, or Gemeinschaftsaufgabe (GA), in which official conferences among Land and federal representatives created annual framework strategies that set funding levels, designated assisted areas across the country, and instituted assistance rates.
The Laˆnder were accountable for program execution and management. The designation of assisted areas followed from clearly defined decision rules and multiple statistical indicators. Certain regions were eligible a priori for assistance, that is, they were not requisite to meet the criteria via the indicators. Incorporated in this particular category, but assisted out of their own individual programs, were the zonal border areas (Zonenrandgebiete), a twenty-five-mile-wide narrow piece down the boundaries with Czechoslovakia and the GDR, and West Berlin. These regions, underprivileged by the postwar division of Germany, enjoyed the highest assistance rates.
Prior to 1979, Germany, like other member states, received its EC structural fund allocations in the form of a fixed national quota negotiated in the Council of Ministers. Between 1975 and 1979, Germany garnered 8.4 percent of European Regional Development Fund allocations, and posted the second lowest per capita share of regional fund expenditure for its assisted areas: ECU8.6 per capita, as compared to the Community average of 27.2.
These modest sums colored the position adopted by the Germans in Brussels. Germany blocked a Commission initiative in the early 1970s to establish a much larger regional fund, and thereafter remained wary of proposals to increase spending on the structural funds. That said, Bonn consistently endorsed efforts to improve the effectiveness of grants and to concentrate resources on the neediest regions in the Community.
Reform of the structural funds commenced in 1979, and gained momentum throughout the 1980s as concern about the regional impact of a barrier-free internal market grew. 5 The structural funds budget expanded, approaching one-quarter of total EC annual outlays, and programs were oriented to Community-wide objectives and criteria set
largely by the Commission, which also gained the capacity to interact directly with regional and sub-regional actors, on occasion bypassing the national governments. To improve the targeting of assistance, the Commission in 1988 recognized five main concerns:
(1) Promoting the development and structural adjustment of lagging regions, defined as those in which per capita GDP is 75 percent or less of the Community average. These regions were to receive up to 80 percent of structural fund allocations; (2) converting regions seriously affected by industrial decline; (3) combating long-term unemployment; (4) facilitating the occupational integration of young people; (5a) promoting the adaptation of agricultural production, and (5b) promoting the development of rural areas (Leibfried and Pierson, 144).
The Commission was authorized to draw up its own list of assisted areas, which did not extend beyond completely with those recognized in national regional programs. For the period 1989 to 1993, the Objective 1 regions include 21 percent of the EC population, and were located on the western and southern border of the Community. Objective 2 and Objective 5b regions contained 16 and 5 percent of the ECs population respectively (Hannequart, 74).
Until unification, the Federal Republic continued to receive modest amounts from the structural funds. Between 1979 and 1989, Germanys share of ERDF commitments fell from 6.2 percent to 3.9 percent. As the wealthiest Community member, it had no Objective 1 regions, and a scattering of Objective 2 and 5b regions in all but one of the eleven Laˆnder.
Moreover, in the 1980s, Germany became the target of sustained efforts by the Commissions DG-IV to limit the area coverage of federal and state regional programs as well as their assistance rates. The pressures of EC competition policy produced results; in 1988, Bonn agreed to reduce the percentage of the population covered by federal and state assisted areas from 45 percent to 39 percent; a further reduction to a figure below 30 percent was scheduled for 1991 (Berg et al., 213).
Bonn officials bridled at the Commissions interventions, in disagreement that DG-IVs actions impeded or got in the way with their legal responsibilities under Article 72 of the Basic Law to secure an equal opportunity of living standards within Germany. They also passed judgment on the EC competition authorities for undermining the delicate conciliations accomplished in the GA between rural and industrial Laˆnder.
On the other hand, federal officials utilized the Commission as a welcome scapegoat in their efforts or endeavor to push expenditure cuts and decrease in area coverage through the GA in response to tapering federal budget limitations in the 1980s. At the European level, the structural resources established to be one of the more controversial substances to surface in deliberations connecting Bonn and Brussels (Hooghe, 171).
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Black, Stanley W. Europes Economy Looks East: Implications for Germany and the European Union. Cambridge University Press, 1997.
Clout, Hugh D. Western Europe. Longman, 1986.
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Hooghe, Liesbet. Cohesion Policy and European Integration: Building Multi-Level Governance. Oxford University Press, 1996.
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