THE IMPACT OF THE ACCESSION OF GREECE, SPAIN AND PORTUGAL TO THE EUROPEAN COMMUNITIES ON IMPORT DEMAND FOR GRAINS AND OILSEEDS

GARRY LYNTON SMITH, Purdue University

Abstract

The objective of this study was to assess the impact of enlargement of the European Communities to include Greece, Spain and Portugal, on their import demand for grains and oilseeds and to draw implications of U.S. exports of these commodities. To this end a price endogenous mathematical programming model of each Applicant Country's agricultural sector was constructed in sufficient detail to estimate the equilibrium adjustments in agricultural production patterns, resouce utilization levels, processing, livestock feeding, consumer demand and trade levels from aligning their agricultural policies with those of the Common Agricultural Policy (CAP). The Applicant Country models were solved and validated separately for the base year of 1974-75 given the countries' existing policies. The models were then employed to simulate the effects of aligning existing price and trade policies with those in force under the CAP in 1974-75. The policy set in each Applicant Country's base model was then replaced with the provisions of the CAP. This included eliminating existing subsidies on production and consumption, removing the Governments' price fixing role, adjusting producer price supports to levels equivalent to basic intervention in the EEC, and extending the Community's common external tariff to Third Country imports. Simulations were carried out under two import price regimes: (a) all grain imports are supplied from Third Country sources at threshold prices; (b) all grain imports, except corn, can be supplied at French c.i.f. prices. Simulations were also performed to determine the effect on import demand for these commodities of a 10 percent expansion in the livestock sectors of the Applicant countries. The alignment of the Applicant countries' policies with those of the CAP resulted in a reduction in the total grain import demand of these countries under the two import price regimes, of 13.4 percent and 6.7 percent, respectively. Total oilseed meal imports were found to increase under import regime (a) and decrease marginally under the French import price regime. Total oilseed meals together with the non-grain substitute tapioca, increased their relative share of aggregate imports and livestock feed rations under both import arrangements. Under the expanded livestock scenarios, total grain imports increased by 9.8 percent and 12.4 percent under import regimes (a) and (b), respectively. Total imports of oilseed meals and tapioca, however, increased by 28.3 percent and 24.9 percent, respectively, under these two regimes. These changes are consistent with what has occurred in the existing EEC Member States as a result of the CAP. A market share analysis was applied to the aggregate import demand of the three prospective and nine existing EEC members to draw implications for future U.S. trade with an enlarged Community. This analysis suggested trade diversion from U.S. to Community sources, ranging from 3.7 percent to 13.2 percent could be expected for U.S. grain exports to an enlarged Community. Only marginal trade creation for U.S. oilseeds (of 0.2 percent) would result from the maintenance of existing U.S. trade shares of these countries.

Degree

Ph.D.

Subject Area

Agricultural economics

COinS