1. Szervezeti egység The impact of the eastern EU enlargement on the prosperity of the old member states’ agricultural export sectors Comparative assessment of the French, German and Italian agri-export developments towards the 10 new eastern member states Master thesis; preliminary results Weinbrenner Timo Supervisor: Prof. Dr. Fertő Imre

2. Szervezeti egység Presentation Outline 1.Motivation of the study and research question 2.Presentation of the utilized indicators and data 3.Research objectives definition 4.Descriptive and analytical results 5.Conclusion

3. Szervezeti egység Consequences of Enlargement and Research Question Main anticipated effects of the enlargement on the agricultural producers in the OMS: 1.Increase of the free trade zone (no trade barriers, common legal system) 2.Emergence of new competitors inside the own markets who also start to benefit from the CAP 3.Increase of import demand by NMS since their market protection against non-EU countries in most cases raised to the EU level Resulting research question What effect did the eastward enlargement of the EU in 2004 and 2007 have on the old member state’s (EU-15) agricultural sectors? Were the old member states able to economically take advantage in their export performance?

4. Szervezeti egység Indicators and Data Data Reporter countries, representing OMSFrance, Germany and Italy Considered NMSBulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia (Cyprus and Malta because they are not part of the CEEC-region) Data type and period of assessmentAnnual exports in value from 1999 to 2011 Data baseOECD iLibrary ObservationsAgri-products in the SITC-5 (543 products) Division of observations by value-added categories Following Chen et al. (2000): raw commodities, processed intermediate goods, consumer-ready food, horticultural products Indicators 1.Exports in value towards the eastern NMS 2.Share of the exports towards the NMS in the reporters world exports 3.Lawrence Index and Krugman Index (to analyze the development of trade patterns) 4.Normalized Revealed Comparative Advantage Index (NRCA), proposed by Yu et al. (2009)

5. Szervezeti egység Lawrence and Krugman Indices Interpretation Lawrence IndexKrugman Index Range 0 – 1 Behavior Increasing with structural transformationIncreasing with structural dissimilarity IndexAssessment Objective Lawrence Structural transformation in trade pattern of the reporter within a predefined period. Krugman Trade pattern similarity measure of the reporter’s trade towards a predefined trading partner compared to the reporter’s world export pattern at one point in time Formulas: Lawrence Krugman Where and r represent the reporter’s share of product j in it’s exports towards a predefined trading partner i and towards the world at time t respectively and β is assumed to equal 0.5

6. Szervezeti egység Normalized Revealed Comparative Advantage (NRCA) Index Interpretation Where E i j denotes the export value of country i for commodity j EiEi denotes total export value (of all ‘j’) of country i E REF j denotes the export value of commodity j of the group of reference countries E REF denotes the total export value (of all ‘j’) of the group of reference countries NRCA valueInterpretation = 0Country i exports product j at the comparative-neutral level > 0Country i exhibits a comparative (export) advantage in product j < 0Country i exhibits a comparative (export) disadvantage in product j Range-2500 to 2500

7. Szervezeti egység Main Research Objectives and Analytical Methods No.ObjectiveObjectives in short 1 Did the dynamic export developments towards the NMS (significantly) change in the accession years in terms of quantity? Changes in quantitative trade dynamics 2 Did the individual NMS / NMS as a country aggregate gain importance as export markets for the OMS? NMS’s significance as export markets 3 Did the dynamic export developments towards the NMS (significantly) change in the accession years in terms of trade pattern (range of products, product groups by level of value-added, top sellers)? Change in trade pattern 4 Did the EU enlargement have a (significant) effect on the OMS’ export performance in the international sellers’ competition? That is change in their revealed comparative advantage? Impact on revealed comparative advantage position

8. Szervezeti egység Objective 1 – Changes in trade quantity (descriptive) But : Comparison export quantities in 1999 with quantities in 2011 Development of export quantities

9. Szervezeti egység Objective 1 – Changes in trade quantity (analytical) Regression model: Here: Y= Exports in value to the CEEC-10 country aggregate Regression coefficients* Sample FranceGermanyItaly c(3)c(4)c(3)c(4)c(3)c(4) All agri- products 10,348 0.3158,550 0.29 10,787 0.37 (0.0000) Wald Test Null: c(3)=0 and c(4)=0 FranceGermanyItaly YES Change in mean value after 2004 Change in trade growth rate after 2004 Also the panel unit root test does not reject the unit root hypothesis. 1 2 = Both indicators show in the same direction: All three countries significantly increased export quantities and growth rates towards the eastern NMS

10. Szervezeti egység Objective 2 – Status of NMS as significant export markets (descriptive) Exemplarily Germany

11. Szervezeti egység Objective 2 – Status of NMS as significant export markets (analytical) Regression model: Here: Y= Share of exports towards the CEEC-10 country aggregate in total world agricultural exports Change in mean value after 2004 Change in trade growth rate after 2004 Regression coefficients* Sample FranceGermanyItaly c(3)c(4)c(3)c(4)c(3)c(4) All agri- products 9.90E-080.178.78E-070.103.26E-070.18 (0.0000) Wald Test Null: c(3)=0 and c(4)=0 FranceGermanyItaly yes The panel unit root test rejects the unit root hypothesis. 1 2 = Indicators ambiguous: All three countries significantly increased their share of total exports towards the eastern NMS, but no unit root identified in the data (unit root test is more robust against outperformers)

12. Szervezeti egység Objective 3 – Changes in trade pattern (descriptive) Exemplarily France

13. Szervezeti egység Objective 3 – Changes in trade pattern (analytical) Top-Sellers by value Exemplarily France Lawrence Index on the reporters' exports towards the CEEC-country aggregate 1999- 2011 1999- 2003 2004- 2011 Period duration in years1347 France All Products0.420.310.32 Bulk Commodities0.480.430.38 Processed Intermediate Goods0.460.310.41 Consumer-Ready Food0.370.280.26 Horticultural Products0.540.210.48 Reference: for a period of 8 years a value of 0.23 is considered as “normal”, high values imply high trade pattern transformation Krugman index absolute value Annual changes in Krugman index 2000 0.50-0.0108 2001 0.0030 2002 0.0110 2003 -0.0403 2004 0.470.0101 2005 0.0046 2006 -0.0211 2007 -0.0214 2008 0.0108 2009 -0.0221 2010 0.0097 2011 0.41-0.0272 Decreases of the index value imply assimilation to world export pattern whole assessment period(1999-2011)0.43 before accession(1999-2003)0.64 after accession (2004-2011) 0.51 Relative rank correlation coefficients (Kendall's tau-b) Kendall’s tau increases from 0 to 1 with pos. correlation P-values of unit root test on mean-deviations from export towards CEEC-aggregate data All products0.02 Bulk commodities0.00 Processed intermediate goods0.72 Consumer-ready food0.45 Horticultural products1.00

14. Szervezeti egység Objective 4 – Effect on the RCA status of the OMS (descriptive) Germany France Exemplarily France and Germany NRCA index developments over the assessment period: Relative changes in RCA between 1999 and 2011: SampleMultiplierquality of change Bulk1.40times stronger Processed0.87times stronger Consumer-ready0.68times stronger Horticultural1.05times less negative Total agri0.79times stronger SampleMultiplierquality of change Bulk0.99times less negative Processed0.65times less negative Consumer-ready1.33times less negative Horticultural1.06times less negative Total agri1.07times less negative

15. Szervezeti egység Objective 4 – Effect on the RCA status of the OMS (analytical) 1 Unit root tests on NRCA time series for all three countries and subsamples: All tests reject the unit root hypothesis did not change 2 Regression analysis on NRCA time series: All wald tests indicate a structural break in 2004, But the corresponding coefficients have rather low values The trade dynamics slightly changed in 2004 = The data reveals minor changes in the RCA status/development of the OMS But:for France a negative effect, coming from comp. advantage for Germany a positive effect, coming from com. disadvantage for Italy a mostly positive effect, coming from com. disadvantage

16. Szervezeti egység Conclusions All research questions returned significant results, but at different magnitude levels for the three assessed OMS. OMS experienced an export boost towards the eastern NMS after 2004 Ambiguity in the indicators caused by outperformers, in combination they are meaningful and point to sectoral driven trade increases. ObjectiveSituation after 2004 for all three countries France, Germany and Italy 1 – trade quantityThe average traded quantity is 2% higher and the slope coef. 59% higher, hence proving changed trade dynamics. 2 – significance of NMS as export market The average share of exports towards the NMS is 1.3% higher and the slope coef. 27% higher, hence increased importance of NMS as sales point. But, panel unit root tests reject unit root hypothesis 3 – trade patternTrade transformation is higher and trade pattern adapts to world export pattern. Exports in Consumer-ready food increase strongest, but for Italy processed intermediate and horticultural products also play an important role. 4 – NRCA statusThe regression results imply that all three countries are improving their comparative export performance in reference to the OECD countries since 1999. After 2004 this trend is abated for France, while fostered for Germany and Italy. All the OMS benefited from the eastward EU-enlargement. The enlarged free trade zone enabled all of them to intensify exports, thereby generating increased sales opportunities for the respective domestic producers. Because total world exports of the OMS significantly increased as well, trade creation can be assumed to have happened. This helped to foster or at least to maintain the competitiveness of their export sectors and likewise their business in agriculture. It translated into significant changes in the NRCA positioning of the OMS in reference to the OECD countries. Because most export increases were realized with consumer-ready food, also the processing sectors benefited. But: France benefited relatively less which lead to an abatement in it’s NRCA development.

17. Szervezeti egység Objective 5 – Greatest beneficiary among the OMS Agri-sector – Product category Relative changes in trade dynamics Italy and Germany both benefit rather at the same relative level. France lags behind. Absolute changes in trade dynamics In absolute terms however Germany proves to be the main exporter towards the NMS, followed by Italy. France is underrepresented in agri-trade towards eastern Europe, given that the French and German total exports range at similar scale. Country abcdef Status development of revealed comparative advantage 1999-2011 Extent of structural change on NRCA data Change of share of trade towards the CEEC- aggregate in total share from 1999 to 2011 Percentage increase in total exports to CEEC- aggregate 1999- 2011 Extent of structural change on export to CEEC-aggregate Krugman Index change from 1999 to 2011 1.ITA2.21 times stronger agri- sector Slope coef. +6%133% (from 3% to 7%) 479%Slope coef. +73%0.11 (from 0.46 to 0.35) Mean coef. +8%Mean coef. +1% 2.GER1.07 times stronger agri- sector Slope coef. +5%113% (from 6% to 13%) 562%Slope coef. +42%0.14 (from 0.45 to 0.31) Mean coef. +2%Mean coef. +3% 3.FRA0.79 times weaker agri- sector Slope coef. -8%192% (From 1% to 3%) 476%Slope coef. +62%0.09 (from 0.5 to 0.41) Mean coef. +2%