EU accession direct payment issue and farm incomes in Slovenia

Abstract

In this article estimation of gross value added (GVA) applying extended economic account for agriculture (EAA) model and partial equilibrium APAS-PAM model has been carried out to emphasize the importance of direct payments for farm incomes in Slovenia after its EU accession. Scenario analysis for hypothetic accession year 2004 with different levels of direct payments' complementing from national budget has been applied. Model results have been compared with agricultural income in 2000 as representative pre-accession year. Results for 2004 depend on accession scenario but show the same trends regardless the model applied. Adopting EU position of complementing direct payments up to year 2001 level significant aggravation of farm incomes at aggregate level could be expected – according to EAA results for about 15 % and in accordance with APAS-PAM forecast even more than a quarter due to negative production effects, imposed by depressed price level. Complementing direct payments from national budget up to the level eligible by current Member states would not result in marked improvement of agricultural income. GVA estimates depend on the outcome of accession negotiations regarding production quotas and reference quantities. Nevertheless, adopting current position of EU would result in stagnation of activities with relative high price level in pre-accession period (pork, poultry) and improvement position of activities which receive greater support under CAP and which economic position was extremely unfavourable in the pre-accession period (beef, coarse grains). 100 % level of direct payments would drastically change support hierarchy of agricultural commodities in Slovenia, while the positive and negative effects would be almost balanced out at the aggregate level.