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Benefits of the CAP to Ireland

Budget and Trade Effects

As mentioned, a high proportion of EU payments to Ireland since accession in 1973 have been in the agriculture sector. These direct payments, now most typically exemplified by the Single Farm Payment, constitute the most obvious and visible benefit derived by Ireland from the Common Agricultural Policy. The evolution of trends in total agriculture related payments to Ireland and the estimated Irish contribution to these payments since EU accession in 1973 is outlined in Figure 7.1 below. The graph illustrates how Ireland experienced significant net disbursements in terms of EU CAP related payments.

Figure7.1    

Source: EU Commission, DAFF, Department of Finance.

This net transfer of resources, entitled the net budget effect (NBE) , is further examined for 2009 and 2010 in Table 7.1. In 2010, the estimated net transfer to Irish agriculture through the EU budget was €978.3 million.

Table7.1 

Source: CSO, OECD, DAFF & USDA

Another facet of the benefits derived from Ireland's EU membership and participation in the CAP is that agricultural commodity prices are generally higher on EU markets than on world markets. Ireland benefits from trading agricultural commodities at these higher prices. Estimates of the benefits derived for a range of our most traded produce is made in Table 7.2. The price gap, which exists between Irish and world prices for each commodity, is calculated from OECD data primarily for world prices and DAFF data for domestic prices. The relevant price gap for each commodity is then applied to the balance of trade between Ireland and the rest of the EU for those commodities providing an estimate of the net trade effect (NTE)[1].

[1]This is derived firstly by calculating the proportion of Irish payments into the EU Budget that can be attributed to Agriculture related payments (taken to equal the proportion of the EU budget spent on Agriculture). This is then subtracted from EU Agriculture receipts to Ireland to give the Net Budget Effect.

Ireland's net trade position for most agricultural commodities improved in 2010, to almost the 2008 value, due to the general improvement in agricultural commodity prices in 2010 and Ireland being a net exporter of these commodities. However the net trade effect is estimated to have decreased significantly, by 60% from €678.8 million in 2009 to an estimated €271.4 million in 2010, which is a historically low level for this measure. This decrease in 2010 is due to world prices increasing by greater than the Irish prices, for all the selected agricultural commodities except cereals.

Interestingly dairy commodity prices on world markets were higher than Irish prices in 2010, which was a reversal on the 2009 situation, this reversal included quite significant price gap changes in butter and casein prices. The price differential between the Irish and world price for beef has narrowed significantly over the last couple of years, resulting in sheep meat having by far the most significant commodity price differential, which was 38.5% in 2010. While on cereal markets, Ireland's prices increased by greater than world prices, resulting in the prices converging.

Table7.2 

Source: CSO, OECD, DAFF & USDA

The combined budget and trade effects for 2009 and 2010 are outlined in Table 7.3. The combined budget and trade effect decreased by 27.8% in 2010, providing an estimate for the overall value of EU agricultural transfers to Ireland in 2010 of €1.25 billion.

Table7.3 

Source: CSO, OECD, DAFF & USDA