Agricultural and economy-wide effects of European enlargement: Modelling the common agricultural policy

The economic impact of extending the Common Agricultural Policy to the Cent ral and Eastern European countries (CEEC) has become a major issue in the E uropean enlargement debate. This paper provides an assessment of the econom y-wide effects of European enlargement using a global general equilibrium m odel where special attention is given to modelling the instruments of the C ommon Agricultural Policy, the Agenda 2000 proposal and the EU budget. The results indicate a substantial potential for increasing agricultural produc tion in the CEEC. The EU budget will increase significantly and the transfe rs from EU taxpayers to farmers in the CEEC result in significant welfare g ains in the new member countries. In spite of these important transfers the macroeconomic costs for the EU are found to be limited.