Market Analysis of Direct Payment Options for New EU Member States Using the AGMEMOD Partial Equilibrium Modelling Tool

Abstract

This paper presents an analysis of the impact of different direct payment policy scenarios on agricultural markets for 10 new EU member states (NMS). The study is based on the AGMEMOD EU-27 dynamic econometric partial equilibrium models. The baseline scenario assumes the preservation of current policy, which would lead to further growth in production for most agricultural markets, resulting from accelerated technological development and the opportunities provided by the EU common market. The only exceptions are the dairy and beef sectors, in which NMS would face a reduction in competitiveness. According to model simulations, reducing the level of payments or abolishing them entirely would not result in any dramatic medium-term changes to agricultural markets in NMS by 2020, which could serve as an argument for supporting future CAP reform.