The Direct Payments Question Will CEE producers be eligible for the full range of payments now enjoyed by EU-15 producers?

The issues Agenda 2000 budget does not include funds for compensatory payments to CEE producers CEE negotiators insist that their producers be eligible for the full range of CAP benefits Will CEE producers be able to compete without direct payments?

CEE officials say no Income from direct payments enables EU farmers to invest and raise productivity. CEE farmers, already undercapitalized, could not make similar investments and would fall further behind. Poles estimate that without direct payments, revenues for wheat producers would fall 30% after accession.

First set of questions How do you model direct payments? Do these influence production decisions? If so, how? What assumptions did you make? What was the impact on your results?

The question of reference areas, yields, herd levels Direct payments to grain and oilseed producers based on reference area and yields set at historical levels Male bovine, suckler calf payments tied to national herd levels and limits on stocking density EU proposes to set these at avg. CEEs argue that these are below their potential and would inhibit expansion.

Average wheat area in the CEE-10 compared to the EU-15

Average wheat yields in the CEE- 10 compared to the EU-15

Cattle inventories in the CEE-10 compared to the EU-15

Questions for discussion Do these “decoupled” payments impact decisions of producers? How will these payments alter the impacts of enlargement? Will the lack of direct payments reduce the competitive position of CEE producers? How will alternative calculations of reference area, yield, and herd levels impact outcome of enlargement?

How will the direct payments issue affect the the CEE beef industry? Currently, CEE cattle are dual purpose dairy/beef animals. If herd structure remains unchanged, beef output will be constrained by EU dairy quotas. But high beef prices could stimulate investment in specialized beef cattle. Will expansion be constrained by low reference herd levels?