Impacts of the Eastern European Accessionand the 2003-Reform of the CAP - Consequences for Individual Member Countries

At the Copenhagen European Council Meeting in December 2002 the European Union (EU) decided to enlarge the EU with ten new member states. In this study the impact of the accession for each of the EU-25 member states is analysed. In particular, results of the accession under different policy environments, including the impacts of the recently adopted reform of the Common Agricultural Policy (CAP), are presented. The analysis is undertaken using the GTAP V5 database and a modified version of the GTAP model, where the CAP and the decoupling of domestic support in the enlarged EU are explicitly modelled. The analysis shows that agricultural supply responses will be very different across acceding countries and that the impact of decoupling direct support is significant. The supply response in the new member states will be significantly smaller in the grain sector, when direct support is decoupled. In the old EU member countries, decoupling of animal premiums will lead to a 7 to 10 per cent decline in the production of beef in the EU-15 and that the lowering of intervention prices in the dairy sector will imply that milk quotas, in some member countries of the EU-15, are no longer binding. Finally, rural factor income in the European Union increase by 3-4 per cent due to the 2003-reform, i.e. including the impact of the decoupled single farm payment and the increased efficiency of agricultural production in all member states. In economic terms the enlargement of the EU with the 10 accession countries is affordable. The analysis supports the view that not alone does economic welfare improve in the EU-15 member states, but the reform also seem to be an attractive alternative to the Agenda 2000 approach, for both the old and the new member states. Both agricultural income and macroeconomic welfare improve.