DP829 | Implications of EC Expansion for European Agricultural Policies, Trade and Welfare

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The expansion of the EC to include EFTA countries, and the greater provision of preferential access to protected EC markets for farmers in Eastern Europe's economies in transition, would have opposite effects on Europe's excess supply of food and on international food prices (assuming EC domestic prices remain unchanged). Their combined impacts on these parameters could therefore be positive or negative, as could the effects on net economic welfare in Europe and elsewhere. A multicommodity simulation model of world food markets is used to estimate the commodity and welfare effects of such integration by the year 2000. The results show that even if just the four most advanced Central European countries were to be given free access to EC food markets, that effective increase in European agricultural protection would virtually wipe out the global benefit from the lowering of EFTA's food prices to those in the EC-12. The budgetary cost to the EC of allowing Central European farmers access to EC markets would amount to one-quarter of the EC's expenditure on farm price supports, or far greater than what would accrue from EFTA countries joining the EC.