CAP Reform, the Berlin Summit, and EU Enlargement

The paper discusses the decisions on the CAP in the context of the Berlin summit. In a rather broad perspective the agricultural sectoral and related objectives are analyzed for their consistency and compatability with higher ranking societal objectives. The policies' allocational and distributional consequences are assessed in a qualitative manner by comparing them with a hypothetical first-best policy. The analysis focusses on the distortions in land allocation between agriculture, forestry and environmental purposes as well as on distributional consequences, taking into account the envisaged eastern enlargement. Among the consequences are excessive budget outlays and high economic rents for landowners, who are increasingly no active farmers themselves. Finally, problems of implementing a liberal CAP reform are discussed.