Eastern Enlargement of the European Union:
- A General and Partial Equilibrium Analysis -
Martin Banse
Institute of Agricultural Economics, University of Göttingen
1
Table of Content
• Introduction
• Description of the Partial and General Equilibrium Models
• Results of a combined modelling approach
• Conclusions
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Economic Relevance of Agriculture in the CEC and the EU
Share of agriculture
in total GDP (%)
Year
1989
Share of agricultural Share of food in total Agro-food trade
employment (%)
household expenditure
Balance
(%)
(Mill US$)
1996
1989
6.3
2.9
13.4
4.1
32.9
Poland
11.8
5.5
26.4
26.7
Hungary
15.6
5.8
22.2
Slovak Republic
9.4
4.6
Slovenia
4.4
4.4
Czech Republic
EU-15
1.7
1996
1989
1996
1989
1996
31.0
-658
-824
36.9
35.0
448
-1218
8.2
25.4
24.0
1557
1806
n.a.
6.0
35.4
35.0
-117
-396
14.8
6.3
25.7
23.0
-85
-478
5.1
18.0
-8796
Sources: OECD(1998b,c), European Commission (1998) and Statistical Yearbooks of CEC.
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General Features of the General and Partial
Equilibrium Models
CGE-Models
Partial Model (ESIM)
8
only agriculture
1 product
1 product
27 products
Relevant results
sectoral output, GDP, wage
rate, exchange rate, imports /
exports, investments,
consumers’ income, welfare
supply, human consumption, feed demand, prices, netexports and budgetary effects
Assumption (exogenous
variables)
constant level of employment,
constant trade balance
surplus/deficit
growth of income and population, real exchange rates,
costs, rate of technical progress
Sectors
Agriculture
Food processing industry
Policy parameters
nominal protection rates
Accession parameters
contribution to EU-budget,
structural aid,
’financial solidarity’,
FDI / X-efficiency
intervention and threshold prices, set aside, tariffs, export
quotas , maximum payments for export subsidies,
compensatory payments,
integration into the Common Market
4
Links between ESIM and the CGE models
Periods
t-1
ESIM
Level of Agricultural
Protection
Macro-economic
Results (factor prices,
CGE-Models
exchange rates,
incomes)
...
t+n
...
Level of Agricultural
Protection
...
Macro-economic
Results (factor prices,
exchange rates,
incomes)
1
2
5
Policy Scenarios
• Accession in 2002
• No transition period
• Reference Scenario: MEMBER / No CAP
• AGENDA / No Direct Payments
• AGENDA + Direct Payments
6
ESIM: Development of CEC-4 Net Exports under
Alternative Policy Scenarios (million tons)
2006
2013
1990-91
Base
1.38
0.32
11.34
13.48
13.36
18.01
17.71
17.69
Wheat
0.65
1.02
5.13
3.30
2.87
8.15
4.91
4.23
Coarse
grains
0.73
-0.70
6.20
10.18
10.49
9.86
12.80
13.46
Oilseeds
0.44
0.18
0.56
0.05
0.08
0.71
0.35
0.37
Sugar
0.52
0.16
0.77
0.39
0.38
1.38
0.46
0.45
Butter
0.02
0.04
0.04
0.06
0.06
0.05
0.05
0.05
Beef
0.15
0.21
0.41
0.28
0.34
0.63
0.21
0.25
Pork
0.19
0.01
-1.38
-1.38
-1.55
-2.06
-1.87
-2.03
Cereals
Member
/No CAP
Agenda
Agenda
+Dir
Member
/No CAP
Agenda
Agenda
+Dir
Of which
Milk
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ESIM: Development of Budgetary Expenditure in CEC-4
10000
m illio n €
8000
6000
4000
2000
0
base
2002
2004
2006
2008
2010
2012
2001
2003
2005
2007
2009
2011
2013
MEMBER
AGENDA
AGENDA+DIR
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CGE Models: Impact of CAP Adoption on GDP
and on Real Exchange Rates
relative to MEMBER/No CAP, in percent
Variable
Scenario
GDP
AGENDA
Exchange Rate
AGENDA+DIR
AGENDA
AGENDA+DIR
Year
2006
2013
2006
2013
2006
2013
2006
2013
Czech
Republic
0.2
0.2
0.7
0.8
-1.1
-0.8
-3.5
-1.2
Hungary
0.4
0.1
1.3
0.9
-1.6
-0.4
-5.4
-2.9
Poland
-0.2
-0.1
1.1
0.2
1.0
1.3
-2.3
0.4
Slovenia
-0.3
-0.3
-0.2
0.1
1.0
0.5
0.6
0.2
9
CGE Models: Impact of CAP Adoption on Sectoral Value
Added and Welfare in 2005
relative to MEMBER/No CAP, in percent
AGENDA AGENDA
+DIR
Value Added
AGENDA
AGENDA
+DIR
Welfare
Poland
Poland
Agriculture
0.3
2.6
Rural households
0.2
21.1
Non-agricultural sectors
-0.3
1.1
Urban households
-0.3
1.0
1.5
6.9
Hungary
Agriculture
12.6
13.4
Hungary
Rural households
Non-agricultural sectors
-0.2
0.9
Urban households
-0.3
0.5
-13.2
-11.4
Slovenia
Rural households
-1.3
1.8
0.9
1.0
Urban households
1.1
1.3
0.3
5.3
Slovenia
Agriculture
Non-agricultural sectors
Czech Republic
Czech Republic
Agriculture
14.8
17.8
Non-agricultural sectors
-0.5
-0.1
Private household
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Conclusions
• CEC accession leads to large production incentives
• Introduction of CAP even without direct payments will
increase total expenditure
• Dramatic increase, if direct payments are included
• Inclusion of direct payment will be and is the major
obstacle in agricultural negotiations
• CEC accession and CAP introduction will have macroeconomic effects on all sectors
– net trade position is crucial ('financial solidarity')
– most consumers will suffer losses from extending CAP to CEC
• However, further CAP reform before Eastern enlargement
would minimise the negative effects
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Further information
• The paper is available in PDF-Format under
http://gwdu19.gwdg.de/~uaao/tanger/banse/listedv.htm
or contact:
mbanse@gwdg.de
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