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Abstract
Beef and pig production are important sectors affected by the cross-compliance policy.
Full compliance with SMRs and GAECs generates costs and benefits which may have an
impact on the competitiveness of these sectors on the world market. Compliance with the
Nitrate Directive, animal identification and registration requirements and animal welfare
standards can give rise to non-negligible cost of production increases at individual farm level
and at sector level. Additional costs can be relevant either due to a low degree of compliance
or by significant adjustments costs at farm level. Full compliance generates a level playing
field between Member States of the EU, as some countries have to face higher additional
costs than others, which are be attributed to differences in degree of compliance.
This paper first presents evidence of additional costs at individual farm level due to
full compliance. Then for beef and pork a methodology has been developed in order to
calculate sector cost impacts following an upcsaling procedure for each of the analysed
directives. Simulations with the GTAP model have enabled an assessment of the trade effect
of compliance with standards and the impact on the external competitiveness of the EU beef
and pork production.
In some policy fields covered by cross-compliance important trade partners such as
Canada, USA and New Zealand have implemented policies similar to the EU. In these three
countries comparable standards to those in the EU were identified and the level and cost of
compliance have been assessed. The pig sector will be affected most by a unilateral
compliance with standards in the EU, in particular as the Nitrate Directive is concerned.
Within the EU pig production costs will rise by 0.545 %. Imports may increase by 4% and
exports may fall by 3%. However full application of the Clean Water Act in the US, which
contains similar obligations to the Nitrate Directive, generates a significant sector cost
increase (1,08%) which may counterbalance the loss of competitiveness of EU pork
production towards the US.
Compliance with the mandatory animal welfare standards has only minor cost
implications and has negligible effects on external competitiveness of the EU both because of
a high degree of compliance and relatively low adjustment costs at farm level.
Finally, in many EU member states the degree of compliance of beef farms with the
animal registration and identification directives is below 100%. Additional costs for full
compliance within the EU have been estimated at 0.455%, which may cause an increase of
beef imports of 2.21% and a decline of exports of –2.12%. This loss in competitiveness of the
EU will further favour the position of Brazil on the world beef market. At the other hand
significant benefits are obtained in food security of EU beef.