SECTORAL AND ECONOMY-WIDE ANALYSIS OF INTEGRATING CENTRAL AND EASTERN-EUROPEAN COUNTRIES INTO THE EU - IMPLICATIONS OF ALTERNATIVE STRATEGIES

The impacts of an EU enlargement to include the seven Central and East ern European Countries (CEEC-7: Hungary, Poland Slovenia, the Czech an d Slovak Republics, Bulgaria and Romania) are analysed using a modifie d version of the multi-region applied general equilibrium GTAP (Global Trade Analysis Project) Model. Based on post-Uruguay Round (UR) prote ction levels for non-agriculture and the latest protection estimates o f the European Commission for agriculture, four different integration scenarios are conducted. Overall, the experiments show that economic i ntegration would result in very substantial increases of both crop and livestock production in the CEEC-7. However, if the rate of direct pr oducer subsidies in the CEEC-7 is held at current levels, the net budg etary consequences of integration for agricultural expenditure will be quite modest. Economic integration of CEEC-7 will cause regional welf are to rise by about 3.4 billion ECU per year in the CEEC-7 and 0.9 bi llion ECU per year in the EU, whereas the welfare gain will be much sm aller if agriculture is omitted from the integration agreement. If acc ompanied by CAP reform, integration will not only allow the CEEC-7 all ocative efficiency to improve, but will also reduce agricultural expen ditures of the EU budget and reverse the adverse effects of CEEC-7 int egration on the poorest countries of the world.