The Agricultural Sector
Although agriculture's share of the economy declined steadily
after World War II, agriculture continues to represent an
important element of the economy because of its social and
political significance. The Chamber of Agriculture remains on an
equal level with the chambers of commerce and labor, although its
members produce only a fraction of the GDP that industrial and
commercial workers produce.
The Government Role
In Austria, as in most other Western countries, the
government has played an important role in agriculture since the
end of War World II. The government has concentrated on
mitigating social, regional, economic, and even environmental
consequences of the sector's decline, as well as delaying the
Agricultural policy has been carried out with different
objectives and with different laws and policies depending on the
times. In the early postwar years, the most important objectives
were survival and self-sufficiency. As a poor country, Austria
needed to be able to feed itself if its population was to
By the 1950s, however, the policy was changing to a more
global perspective, while keeping intact the traditional form
economy. The government wanted to protect domestic production,
stabilize agricultural markets, protect farmers' incomes, and
improve the sector's ability to compete in Austria and abroad.
Increasingly, the government began to believe in the importance
of maintaining rural society as an objective in its own right,
for social reasons, and to protect the environment and encourage
tourism. Because of these aims, agricultural policy, more than
any other economic policy, reflects a mixture of economic and
noneconomic objectives and concerns. The principal aim, however,
is to preserve the existing number of farms as much as possible.
Within the structure of the social partnership, various
organizations work to maintain farm incomes and thus farm
existence, among them the Grain Board, the Dairy Board, and the
Livestock and Meat Commission. These organizations set basic
support prices, taking into account domestic costs and local
supply and demand, with only weak linkages to world market
The boards and commission use a variety of measures to
achieve their broad purposes. Among these measures are import
restrictions, such as border controls and entry controls--some of
which may be bilaterally negotiated--and variable import duties.
If import restrictions are not sufficient to maintain prices
because of excess production, the surplus is exported at
subsidized prices (with the subsidies usually coming from federal
or provincial authorities). Authorities also apply production
controls, such as sales quotas or limits, on the size and density
of livestock holdings. Quotas exist for many different products,
with the quotas usually fixed on the basis of past production.
Price and quality controls and limits also exist, especially with
respect to different prices for different grades of wheat or
milk. The government can also pay direct income supplements, but
these payments are generally restricted to certain mountain
farming zones and other equally disadvantaged areas. Subsidies
are mainly paid by the federal government but may in some
instances be paid by provincial governments.
Because of the complex system of price supports and market
access limitations, the exact share of subsidy costs to the
government and to consumers is virtually impossible to calculate.
Experts estimate that the total cost to the federal and other
governments for agricultural and forestry support during the late
1980s was approximately S16 billion a year, a level that would
have been roughly at the same level as that of many other
Organisation for Economic Co-operation and Development (OECD)
governments but slightly higher than the EC average.
The economic research institute Österreichisches Institut für
Wirtschaftsforschung (WIFO) estimated after a major 1989 study
that about 71 percent of the cost of agricultural support was
borne by consumers in the form of higher prices, with the
taxpayers carrying the remaining 29 percent through such
different programs as direct and indirect federal and provincial
subsidies or various kinds of market regulation.
Austria's decision to enter the EU will have certain effects
on its agriculture and forestry. Support prices in Austria are
higher than those set under the EU's Common Agricultural Policy
(CAP), although the two systems are in many ways similar.
Austrian government-borne subsidy costs are at about the same
level as those in the EU, but consumer-borne subsidy costs are
higher, so food prices in Austria average about 30 percent higher
than those in the EU. Full integration into the EU will thus
compel a number of adjustments in Austria. These adjustments may
be even more severe if they become effective at the same time
that some East European countries with lower production costs
enter the EU. Much depends, of course, on any reforms that may
take place in the CAP.
Data as of December 1993