The impact of governmental policy on the competitiveness of the Estonian agricultural sector

In developed countries public policy measures in area of agriculture have specific aims arising from community's deficiencies. Through the support and regulation of agriculture the governments try to influence the social, regional, and ecological development of the country. Due to the complexity of the aims also the measures used to support the agricultural sector, and the influence of those measures are diverse and complicated. The aim of the present article is to assess Estonian agriculture's internal and international competitiveness' dependence on public policy. To reach this aim, at first the different strands of literature have been reviewed, by comparing and integrating different approaches. Comparative and trend analysis is the methodology used to analyse the changes in competitiveness of the agricultural sector over time. In the 1990s Estonia chose different direction in supporting the agricultural sector and therefore got different results in the development of agriculture and country life. In several countries agriculture is heavily supported. As a result different countries have different conditions for agriculture and food industry. Mainly these differences exist due to the isolation countries have created for these sectors. Estonia’s agricultural policy was somewhat contradictory until joining the EU. Governmental support measures for agricultural sector were implemented for the first time in 1998. Those measures covered very few products and the support level was quite low. The import tariffs against the third countries were not introduced until the year 2000. These tariffs were smaller than those of our main trading partners, and therefore could not neutralise the distorting effect of other countries' governmental intervention. Before Estonia became an EU member state, its agricultural and food industry had to compete on unequal terms with foreign enterprises both domestically and internationally. As a result the agricultural production in Estonia decreased dramatically in the 1990s. The unequal competition conditions in agriculture also affected negatively the regional development of Estonia, and through the low income level and rising unemployment rate the society as a whole. Currently the situation in agricultural sector has slightly improved due to the Common Agricultural Policy of the EU.