Modelling the effects of Croatia's accession to the EU: Trade and Agricultural Policies

Abstract

Croatia joined the European Union (EU) on July 1st, 2013. This paper assesses the likely effects of this accession on the agricultural and food sectors, and analyses the impact on the EU, Croatia and their main trading partners. It considers both the harmonization of Croatia's trade instruments with those applied in the EU, and the adoption of the Common Agricultural Policy (CAP). The analysis is carried out using MAGNET, a global recursive dynamic CGE model. Results show that Croatia slightly benefits from its accession to the EU with an increase in GDP, whereas the impact on the EU-27's GDP is insignificant. Total exports of Croatian agricultural products increase by 7.4% and those of food products decrease by 2%. Croatia will face some changes in its production structure. At constant prices, agricultural production benefits (increasing by 1.1%), whereas food production contracts (decreasing by 5.5%). This result sheds some light on competitiveness limitations of the Croatian food processing industry. The scope of this paper is to model both European trade and agricultural policies. It is worth mentioning that other EU policies such as the structural or cohesion policies, and additional gains resulting from the accession such as a less risky investment environment or a more efficient regulatory framework, are not modelled