EU Enlargement and Austrian Agriculture. Enlargement as a New Challenge

Given the strong agricultural orientation of their economies, agriculture is a matter of special interest to the majority of Central and Eastern European candidate countries for accession to the European Union. The farmers in these countries will benefit from the Common Agricultural Policy. The new production incentives thus created may result in an additional burden being placed on agricultural markets and stimulate the discussion about further reforms of the CAP. Owing to its geographical proximity to Central and Eastern Europe and its competitive weaknesses in important areas, Austrian agriculture is likely to be strongly affected by EU enlargement. In the agricultural markets EU enlargement will generate both opportunities and risks for Austrian farmers. In the crop growing sector, Austrian farmers will feel the pressure of supplies coming in from the new Central and Eastern European member states of the European Union and prices will decline as a result. For fruit and wine growers enlargement will open up new marketing opportunities, while vegetable growers and market gardeners will probably be losing market shares. For cattle farmers, no major short-term problems are to be expected, although there is a risk of producers having to give up market shares on a longer-term basis, as competition from the new member states will gradually increase. The impact on dairy farmers depends primarily on the future fate of the common market organisation for dairy products. As long as the current, strict market regime with its stringent control of supplies through national quotas and its intervention rules remains in place, the Austrian dairy sector will be only moderately affected by enlargement. If, however, these central elements of the common market organisation were to be abolished, Austrian dairy farmers would most probably suffer a loss of market shares. Pig and poultry farmers have already lost market shares to competitors in Western Europe since Austria's accession to the European Union. This trend is expected to continue in the foreseeable future, with enlargement being of secondary importance on a medium-term basis. Forestry and the timber industry have traditionally been operating in open markets and will hardly be concerned by enlargement. On balance, WIFO's medium- to long-term analyses point to a loss of market shares for Austrian agriculture. This will diminish the income generated from agriculture and stimulate structural change in the sector. Regions bordering on the accession countries will come under particular pressure to adjust their structures. For these regions, with their underdeveloped local economies, agriculture is of above-average importance. If in these regions the increased need for structural adjustments in agriculture coincides with economic and labour-market problems, farmers may find themselves in a difficult situation. Hence, special attention should be paid to these problems by economic policy.