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Abstract
The third EC enlargement to include Spain and Portugal raised substantial problems in
the international olive oil market, where the EC-10 accounted for 48 percent of production and 52 percent
of consumption and the new EC members for 30 percent and 24 percent, respectively. Olive oil was highly
supported in the EC-10, where producer prices were more than twice the international prices. Extending
(from 1986 to 1991) the EC-10 price support to Spanish and Portuguese producers would have meant huge
EC-12 budgetary costs and a complete price collapse of the tiny world market.
This paper presents three simulations of the world market by means of a multi-product and multiregional
price equilibrium model of the oils and fats sector: (1) the impact of the EC enlargement to
include Spain and Portugal without CAP changes; (2) the impact of the EC-12 offer in the GATT
negotiations implying a 30-percent decrease in domestic support for olive oil, butter, animal fats, and a
6-percent import tariff for oilseeds and other vegetable oils; and (3) the decrease in the producer price
support of olive oil that would be needed to offset the impact of enlargement on the EC-12 trade balance.