Brussels, 18 March 2002
Candidate countries' farmers better off in EU, says Commission study
A study published by the European Commission today concludes that membership of the European Union will significantly improve the prospects for farmers in the candidate countries, without creating major market imbalances for an enlarged Union. Four different policy scenarios ("no enlargement", "introduction of the Common Agricultural Policy (CAP) without direct payments", "CAP with direct payments", and "Candidate Country Negotiating Position") have been considered. The simulation shows that even under the most pessimistic restructuring scenarios, EU accession will have positive effects on the income of farmers in the candidate countries. The report also underscores the Commission's view that immediately paying 100% of direct payments would create significant social distortions and inequalities and would hamper the necessary restructuring, given that farmers' income in the candidate countries could more than double (for details see tables in annex). The study underscores that these positive effects of EU membership can only be reaped if the necessary restructuring to meet EU production standards will be made.
According to the report, even the application of EU market measures such as intervention with zero direct payments is likely to generate an increase in farm income of around 30% for the eight Central and Eastern European candidate countries (CEEC-8(1)) in 2007. Increases would be particularly significant in the Czech Republic (+60%), Latvia (+59%), Estonia (+55%), Slovakia (+45%) and Poland (+35%). The application of 100% direct payments on the basis of recent reference periods would triple this effect (income +89%), while accepting the candidate countries negotiating positions would quadruple the positive income effect (+123%).
Commenting on these findings, Commissioner Fischler said, "The conclusions are clear. Being in is better than being out. EU membership will bring significant benefits to the farmers from the candidate countries. But this study also sends a plain message. There is not such thing as a blank cheque. In order to reap the benefits of EU membership the candidate countries have to meet EU production standards. To achieve this, they have to make the necessary efforts to restructure, especially in the livestock sector. This is why we have proposed reinforced rural development with targeted measures such as support for semi-subsistence farms.
"Prospects for staying outside the EU are poor, particularly for the beef and dairy sector. This study backs the Commission's strategy. It is obvious that with our proposals for direct payments (25%-30%-35% from 2004 to 2006) the situation for farmers in all candidate countries will be more favourable than remaining outside the Union. This study shows that a certain amount of direct payments is necessary to stabilise incomes. But a low level of direct aid support is enough to ensure that all CEECs experience positive income effects as a result of enlargement.
On the other hand, the report makes clear that 100% direct aids would lead to a situation where an average Hungarian or Czech farmer would all of a sudden receive more than double the average national wage. This would undermine incentives towards labour restructuring in countries with small farm structures and would create social distortions and inequalities."
THE CONCLUSIONS OF THE STUDY(2)
1. Poor prospects for farmers in the CEECs outside the EU
Whether candidate countries will be able to fully reap the benefits of the EU will depend on their ability to meetthe existing body of EU law ("acquis") and produce to EU standards in the livestock sector, particularly in those countries with a large semi-subsistence sector. The study does not foresee these problems in the crop sector.
The Commission has foreseen measures in its proposals to ensure that candidate countries can achieve these benefits by 2007 through restructuring aid under rural development and a specific measure to help the semi-subsistence sector move to full commercial standards.
This necessary restructuring would be far more painful outside the EU, without access to targeted rural development programmes and structural funds programmes.
2. A low level of direct aid support is enough to ensure that all CEECs experience positive income effects as a result of enlargement
3. 100% direct aids lead to very strong income effects, which could undermine incentives towards labour restructuring and create social distortions and inequalities
4. CEEC farmers can grow and be competitive in the single market
5. Enlargement will not create major market imbalances for an enlarged Union
It should be noted that additional positive income effects coming from the enhanced rural development measures proposed by the Commission are not reflected in these simulations.
The full study is available on DG Agriculture's website:
Sector output and income(3) in 2007
The tables show the results of the four simulated scenarios:
"baseline", which assumes non accession and unchanged agricultural policies in the CEECs,
"CAP", the implementation of the CAP without direct payments. Production quotas are based on a recent reference period,
"CAP DP", the implementation of the CAP with full direct payments. Production quotas are based on a recent reference period,
"CC position", the implementation of the CAP with full direct payments and quotas. Direct payments and quotas are based on the position of the Candidate Countries submitted before July 2001.
(1)All CEECs except Bulgaria and Romania
(2) The study "Analysis of the Impact on Agricultural Markets and Incomes of EU Enlargement to the CEECs, is based on the European Simulation Model (ESIM), and was run internally in DG AGRI.Four scenarios were simulated:1.."baseline", which assumes non- accession and unchanged agricultural policies in the CEECs,2.."CAP", "the implementation of the CAP without direct payments. Production quotas are based on a recent reference period3.."CAP DP", the implementation of the CAP with full direct payments. Production quotas are based on a recent reference period 4.."CC position", the implementation of the CAP with full direct payments and quotas. Direct payments and quotas are based on the position of the Candidate Countries submitted before July 2001.
(3) Crop and livestock output do not include direct payments (gross value added at market prices). Sector income does include direct payments (gross value added at basic prices).