The common agricultural policy and the balance of payments of the EEC member countries

Abstract

The Common Agricultural Policy (CAP), one of the main forces working for the integration of EEC member countries, generates an economic burden for each member which affects the balance of payments and the real income. This study assesses, for each member country, consumers’ transfers to the farmers of the other member countries, and calculates by how much imported and exported food prices are higher. The author establishes the net cost or benefit of the CAP to the balance of payments of each member country, i.e. the loss or gain of foreign exchange reserves. For simplicity, the methodology adopted assumes that there is no downward impact of the CAP on extra-EEC agricultural prices, which in its absence, would be higher. Results for each member countries are, therefore, not valid per se but in comparison with the results of the other member countries. Final results show that Italy bears the heaviest share of the burden.

JEL: F31, F32, F36