An ex-ante analysis of a customs union between Malta and the European Community within the context of the Common Agricultural Policy

Abstract

This dissertation will be divided into five parts. The first chapter deals with a review of the main developments within the agricultural sector which took place during the period 1971-1988 within the context of the 1971 Association Agreement and the subsequent Protocols stemming from it. It will also include a comparative analysis of the impact of EC enlargement on non-member Mediterranean countries by utilising the Finger-Kreinen Export Similarity Index. Chapter II deals with the Customs Union issue - its theoretical underpinnings and the alternative forms of Customs Union models within the framework of the CAP that may be negotiated by the Maltese Government. However the study shall concentrate more on the so-called "maximum" form as this is the most probable form that would be accepted by officials in Brussels besides being the closest to identifying the possible economic effects on the local agricultural sector of full membership into the Community. Chapter III analyses the agricultural sector in Malta and the Community. With regard to the former, it will seek to highlight the principle features of the Maltese agricultural sector - sector's contribution to GDP, the structure of holdings, the prevailing agricultural policy etc. On the other hand, the second part of the Chapter will discuss the basic objectives and principles underlying the CAP, the pricing and rnarl-\.et mechanisms, the structural policy and the financing of the policy. Chapter IV is the crux of the whole study in that it seeks to quantify in monetary terms the impact effects on consumers, producers and the national budget of Malta adopting the ‘maximum’ form alternative with common financing. The estimates should provide sufficient evidence to all interested parties in order to assess the merits and demerits of proceeding to such an advanced form of Association. The use of an ex-ante approach avoids the risk of lumping together the static and dynamic effects of a customs union (although reference will be made to the possible adjustment effects that will arise in the medium-term, the study shall concentrate on the static effects). Chapter V is the unifying and concluding chapter. It attempts to analyse the implications of the preceding estimates and also provide an insight into the options open to the Maltese government. Such implications must necessarily be viewed within a political perspective (the whole issue implies a definite political choice) and in the light of the ongoing reforms in the CAP both at a community and international level.