1. Szervezeti egység The Impact of the Eastern European Enlargement on the Prosperity of the Old Member States’ Agricultural Export Sectors A comparative assessment of the French, German and Italian agricultural export developments towards the new eastern member states and of their effects on the respective revealed comparative advantage positions Master thesis presentation at AFEPA summer school 2013 Weinbrenner Timo Supervisor: Prof. Dr. Fertő Imre

2. Szervezeti egység Presentation Outline 1.Motivation of the study and research question 2.Research objectives and indicators 3.Analytical method 4.Descriptive and analytical results 5.Summary and Conclusion 2 2013.08.08. Weinbrenner Timo

3. Szervezeti egység (1)Motivation and research question 3 2013.08.08. Weinbrenner Timo Literature shows that the Central and Eastern European Countries (CEECs) benefitted from their EU-accessions in the form of welfare gains, while the EU-enlargement implied a moderate welfare decrease for the old member states (OMS). The thesis singles the OMS’ agricultural sectors out and assesses the impact of the EU- enlargement on them specifically. Motivation Research question EU-enlargement consequences What overall economic effect did the three changes in the business environment have on the OMS’ agricultural sectors? Consequences for the business environment of the agricultural producers in the OMS:

4. Szervezeti egység (2)Research Objectives and Indicators 4 2013.08.08. Weinbrenner Timo No.ObjectiveIndicator 1 Changes in quantitative trade dynamics Disaggregated exports in value from OMS towards NMS 2 NMS’s significance as export markets Share of exports towards the NMS in the OMS’ total exports. 3 Change in trade pattern Exports in value by product category (degree of processing) Lawrence Index (trade pattern analysis tool) Krugman Index (trade pattern analysis tool) Annual mean deviation of export data (distribution divergence analysis) 4 Impact on revealed comparative advantage (RCA) position Normalized Revealed Comparative Advantage Index. (NRCA Index) Annual mean deviation of NRCA Index (distributional divergence analysis 5 Greatest beneficiary among the OMS Comparative analysis of the individual reporter’s results. Data specification of basis for all indicators Data and data sourceExports in value; OECD iLibrary data base Representatives for OMS (Reporters) France, Germany and Italy NMS in eastern EuropeEstonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Romania, and Bulgaria Assessment period1999 to 2011 Analyzed trade items543 agricultural products (all agricultural entries in SITC-5) Product categories (differentiated by degree of processing and input-intensity) 1 – raw commodities 2 – processed intermediate goods 3 – consumer-ready food 4 – horticultural products } Chen categories = Data panel with 7059 observations (13 temporal observations for each of the 543 products)

5. Szervezeti egység (2)Explanation of indicators; Lawrence and Krugman Indices 5 2013.08.08. Weinbrenner Timo Interpretation Lawrence IndexKrugman Index Range 0 – 1 Behavior Increasing with structural transformationIncreasing with structural dissimilarity IndexAssessment Objective Lawrence Structural transformation in the trade pattern of the reporter within a predefined period. Krugman Trade pattern similarity 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 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 (2)Explanation of indicators; NRCA Index 6 2013.08.08. Weinbrenner Timo Interpretation: 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 (after multiplication of all index values by 10,000 for a more convenient presentation)

7. Szervezeti egység (3)Analytical Method to analyze the indicators 7 2013.08.08. Weinbrenner Timo 1 2 3 Descriptive analysis Time series regression model to test for structural breaks: Change in mean value after 2004 Change in trade growth rate after 2004 Panel Unit Root Test for Distributional Divergence: Panel Unit Root Tests are performed on the mean deviations of the export in value data from the OMS to the NMS. A confirmed Unit Root would indicate distributional divergence over the assessment period Wald test for joint probability: c(3) = 0; c(4) = 0

8. Szervezeti egység (4) Results1. Trade Quantities FranceGermanyItaly c(1)c(2)c(3)c(4)c(1)c(2)c(3)c(4)c(1)c(2)c(3)c(4) Regression results 607,5390.5110,3480.311,971,9220.6958,5500.29872,6610.5110,7870.37 (0.00) Wald test Significant c(3)/c(1) 1.7%3.0%1.2% Total agricultural exports from the OMS towards the CEEC country aggregate: 2013.08.08. 8 Weinbrenner Timo Regression results:

9. Szervezeti egység (4) Results2. NMS as export markets 2013.08.08. 9 Weinbrenner Timo Proportion of the reporters’ world exports directed towards the CEEC region (export shares): FranceGermanyItaly c(1)c(2)c(3)c(4)c(1)c(2)c(3)c(4)c(1)c(2)c(3)c(4) Regression results 1.3E-050.549.9E-080.174.0E-050.738.8E-070.103.7E-050.543.3E-070.18 (0.00) Wald testSignificant c(3)/c(1)0.8%2.2%0.9% Regression results:

10. Szervezeti egység (4) Results3. Trade Pattern 2013.08.08. 10 Weinbrenner Timo Trade pattern = the composition of the export flow of a reporting country Distributional DivergenceKrugman average annual changeLawrence 1999- 2008 1999- 2003 2004- 2008 France 0.370.310.25 Germany 0.420.230.27 Italy 0.290.22 Above-average transformation rate; No EU-enlargement effect detectable 2000- 2004 2005- 2009 France -0.005-0.010 Germany -0.018-0.008 Italy -0.006-0.011 Continuous adaptation; Difference apparent, but inconsistent Annual Mean Deviations: Unit Root is accepted for France, Germany and Italy at 1% level Divergence in export flows confirmed Initial ranking of Chen categories systematically reinforced (in absolute and relative terms): 1.Consumer-ready food 2.Processed intermediate goods 3.Raw commodities 4.Horticultural products But: for Italy Horticultural products is the second most important category. Agri-exports towards the NMS, in million USD Chen categories as division key:

11. Szervezeti egység (4) Results4. RCA position 2013.08.08. 11 Weinbrenner Timo Reference country group is the OECD family NRCA evolvements from 1999 to 2011 Germany c(1)c(2)c(3)c(4) NRCA Index for entire Agri- sector -0.0248920.7030810.000443-0.03463 (0.0000) (0.0001) (0.0000) Wald test(improving) significant c(3)/c(1)-1.8% Regression results, exemplarily for Germany: For France, Germany and Italy the c(3) and c(4) coefficients are significant and improving in nature (except FRA c(4)). But: the NRCA Index developments are not congruent with the export flow developments. Conclusion: EU-enlargement had a supportive effect on the NRCA Index

12. Szervezeti egység (4) Results5. Greatest Beneficiary 2013.08.08. 12 Weinbrenner Timo 1 2 3 Absolute trade increase Effect on NRCA position Relative trade increase Decisive is the general involvements of the OMS in the sales markets of the NMS RankCountryc(3) 1Germany58,550 2Italy10,787 3France10,348 RankCountryc(3)/c(1) 1Germany3.0% 2France1.7% 3Italy1.2% heterogeneous Relatively equal In concordance with the level of involvement in the CEECs’ sales markets: RankCountryExport share towards NMS 2011 1Germany13% 2Italy7% 3France3%

13. Szervezeti egység (5)Summary and Conclusion (i) 2013.08.08. 13 Weinbrenner Timo Positive effect proven for: 1.Trade quantities towards NMS 2.Export shares towards NMS 3.Support of RCA position EU-Enlargement effect on French, German and Italian agricultural sectors Trade creation Business Boost for OMS

14. Szervezeti egység The agricultural sectors of the OMS are internationally competitive. OMS supply the NMS at different intensity levels (shares of total export). Germany has highest involvement, followed by Italy. France marginally active in NMS. Export patterns continuously transformed and converged to world export pattern. Transformation occurred with structural determination, in favor of highly processed products (while Italy as well is strong in horticulture). Convergence indicates a process of maturing trade linkages. Germany exhibits least Krugman-differences NMS are heterogeneous sales markets for the OMS. Main trading partners: Absolute quantities: Poland, Czech Republic and Hungary, new comer Romania. Quantity per capita: Baltic states, Czech Republic, Slovenia and Slovakia. Within the agribusiness, the food processing industry might be a major winner, since the greatest share of trade increases was achieved with consumer-ready food products. NRCA Index improvements rely heavily on a small number of competitive products (5)Summary and Conclusion (ii) 2013.08.08. 14 Weinbrenner Timo Other Revealments

15. Szervezeti egység 2013.08.08. Weinbrenner Timo 15 Thank You for Your Attention!!