Economic Welfare Effects of Romanian Agricultural Accession to the EU

Abstract

The EU’s enlargement process towards the East is a hotly debated subject for the policymakers of both the present members of the EU and the applicant countries. The economic and social costs and benefits of this process are still questions with imprecise and controversial answers. In the context of enlargement, agriculture is an essential topic due to the importance of the sector for most of the future members and the budgetary implications of extending the current Common Agricultural Policy (CAP), in particular the role of direct payments. It is estimated (European Commission, 1997a) that if all ten Central and Eastern European Countries (CEECs) join in 2002 with full adoption of the existing CAP, the budgetary impact by 2005 would represent an additional cost to the FEOGA Guarantee Section of 11 billion ECU (EURO) per year, of which about 63% would be direct payments. Furthermore, it is widely believed that the agricultural sector represents a major obstacle to EU accession in most applicant countries owing to changes in EU rates of protection, the budgetary costs of applying the CAP, commitments under the WTO agreements, and the incidence of high food price levels on consumers. For a large country such as Romania, the agricultural sector plays a major role in EU accession in terms of its economic consequences.