UNIVERSITY OF ORADEA UNIVERSITATEA DIN ORADEA [611122]
UNIVERSITY OF ORADEA / UNIVERSITATEA DIN ORADEA
FACULTY OF ECONOMIC SCIENCES /
FACULTATEA DE ȘTIINȚE ECONOMICE
Field of Study / Domeniul: Economics and International Business
/ Economie și Afaceri Internaționale
Bachelor Study Programme / Programul de studiu:
INTERNATIONAL BUSINESS /
AFACERI INTERNAȚIONALE (ÎN LIMBA ENGLEZĂ)
Type of Studies / Forma de înv ățământ:
Full Time / Învățământ cu frecvență / IF
BACHELOR THESIS /
LUCRARE DE LICENȚĂ
Opportunities and Challenges in
International Trade
Scientific Coordinator / Coordonator Științific:
Assoc.Prof.Dr. / Conf.univ.dr.ec. Adriana GIURGIU
Graduated Student / Absolvent: [anonimizat]
2017
1
CONTENTS
CONTENTS ………………………….. ………………………….. ………………………….. ………………………… 1
List Of Abbreviations ………………………….. ………………………….. ………………………….. …………….. 3
List Of Figures ………………………….. ………………………….. ………………………….. ……………………… 4
List Of Charts ………………………….. ………………………….. ………………………….. ……………………….. 5
List Of Tables ………………………….. ………………………….. ………………………….. ……………………….. 6
Introduction ………………………….. ………………………….. ………………………….. ………………………… 7
PART I: THEORETICAL APPROACHES ………………………….. ………………………….. ………. 9
I. Theoretical Approaches In Contemporary International Trade ………………………….. ………….. 9
1.1. Overview Regarding The Global Economy – Opportunities And Challenges ……………. 9
1.1.1. General Economi c Framework And The Global Future Conditions …………………… 9
1.1.2. The Role Of Imf In The Post -War World Economy ………………………….. …………… 13
1.2. The Developments Of The International Trade During The Last Decades ………………. 14
1.2.1. International Institutions In Charge With International Trade …………………………. 14
1.2.2. The Proliferation Of The Free Trade Agreements ………………………….. ……………… 15
1.2.3. From Custom Union To Regional Economic Integration ………………………….. ……. 17
II. International Trade Theories ………………………….. ………………………….. …………………………. 19
2.1. Classic Theories ………………………….. ………………………….. ………………………….. …………. 19
2.1.1. Mercantilism ………………………….. ………………………….. ………………………….. ……….. 19
2.1.2. Absolute Advantage Theory And Comparative Advantage Theory ………………….. 20
2.2. Competitive Advantage Theory ………………………….. ………………………….. ………………… 23
III. European Union And The Romania’s External Trade Integration ………………………….. ….. 28
3.1. The Common Commercial Policy ………………………….. ………………………….. …………….. 28
3.2. The Impact Of The Romania’s Eu Membership On The External Trade ………………… 34
2
PART II: STUDY CASE: THE IMPACT OF ROMANIA’S MEMBERSHIP ON
EUROPEAN UNION OVER ROMANIAN AGRIFOOD INDUSTRY ………………………. 38
I. Introduction ………………………….. ………………………….. ………………………….. ……………………… 38
II. Romanian Food Sector In The European Union Context ………………………….. ……………….. 41
2.1. An Overview On Romanian Food Sector ………………………….. ………………………….. …… 41
2.2. European Union Funds For Investments In Romanian Agrifood Sector ………………….. 43
2.3. Foreign Direct Investments In Romanian Agrifood Sector ………………………….. ……….. 45
III. Scenario Analysis ………………………….. ………………………….. ………………………….. …………… 48
CONCLUSIONS AND DISCUSSIONS ………………………….. ………………………….. …………… 56
BIBLIOGRAPHY ………………………….. ………………………….. ………………………….. ……………… 59
A. Books ………………………….. ………………………….. ………………………….. …………………………. 59
B. Articles ………………………….. ………………………….. ………………………….. ……………………….. 59
C. Statistics, Publications ………………………….. ………………………….. ………………………….. ….. 62
D. Websites ………………………….. ………………………….. ………………………….. ……………………… 63
3
List of Abbreviations
Abbreviation The significance of the abbreviation used in text
AFTA ASEAN (Australia – New Zealand) Free Trade Area
APTA Asia Pacific Trade Agreement
CACM Central American Common Market
CAN Andean Community
EC Treaty Treaty Establishing the Economic Community
EFTA Accession of Iceland
EU European Union
FDI Foreign Direct Investment
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GSP General Scheme of Preferences
IMF International Monetary Fund
LAIA Latin American Integration Association
MARD Ministry of Agriculture and Rural Development
NAFTA North American Free Trade Agreement
NRDP National Rural Development Programme
OECT Organization for Economic Co-operation and Development
SME Small and Medium Enterprises
UNCTAD United Nations Conference on Trade and Development
USA United States of America
WTO World Trade Organization
4
List of Figures
Figure 1: The Porter Diamond ………………………….. ………………………….. ………………………….. . 25
Figure 2: The structural determinants of the five forces of competition ………………………….. .. 26
5
List of Charts
Chart 1: Production price and selling price of soft wheat for no accession scenario compared
to EU membership scenario ………………………….. ………………………….. ………………………….. ….. 50
Chart 2: Production price and selling price of barley for no accession scenario compared to
EU membership scenario ………………………….. ………………………….. ………………………….. ……… 51
Chart 3: Production price and selling price of maze for no accession scenario compared to EU
membership scenario ………………………….. ………………………….. ………………………….. ……………. 52
Chart 4: Production price and selling price of sunflower for no accession scenario compared
to EU membership scenario ………………………….. ………………………….. ………………………….. ….. 53
6
List of Tables
Table 1: The eight rounds of GATT ………………………….. ………………………….. ……………………. 14
Table 2: Regional Trade Agreements ………………………….. ………………………….. ………………….. 16
Table 3: Comparative advantage in raw materials and Lafay Index ………………………….. …….. 23
Table 4: European Member Countries and the membership year ………………………….. ………… 30
Table 5: Real annual selling prices on the market for selected crops ………………………….. ….. 54
7
INTRODUCTION
The subject of the thesis is “Opportunities and Challenges in International Trade” . I
have chosen this subject because inter national trade impact s higher and higher the national
market s. The countr ies are interconnected, with stronger interdependencies, due to
globalization, technology and tendency to create a single global market. This international trade
is characterized by a lot of challenges, but also opportuniti es. Hence there is a must to take
advantage over the opportunities and to be aware of the challenges in order to be competitive
on international market.
Through this thesis I will describe the international conditions for making business and
I will demon strate that a country (Romania in this case) could develop and enhance its national
market by availing oneself of the opportunities av ailable on global level.
The analysis methodology is based on economic articles that illustrate the nowadays
and future c onditions for making business. The statistical data are extracted from specialized
data base like Eurostat, from paper works made by economists and from books written by
academic authors. For describing several international institutions the data are avail able on their
own websites.
The thesis is structured in two main parts. The first one is the theoretical approach and
the second is the case study. The first part is divided in three chapter. The first chapter
introduces the subject, presenting the main challenges and opportunities t hat could be identified
on international level and which are the future global conditions. The international i nstitutions
are also a relevant opportunity for nowadays international trade. The second chapter has a more
rigid approach, explaining the most su itable and relevant international theories that creates a
background, a model for understanding the behavior of the economic actors and for giving a
path of action for international trade actors. The last chapter of the first part describe s the
creation of the European Union, its characteristics, scope and purposes and presents the
Romanian accession process.
The study case regards the impact of Romania’s membership on the European Union
over Romanian agrifood industry. This study case is relevant for the thesis because it
demonstrate s the positive effect s of the European Union membership opportunity over
Romanian national market. Starting with the accession process several major changes took
8
place at national level. For this I have chosen for the study c ase to compare the result s of
Romanian agricultural sector for no accession scenario and integration scenario. The reason
why I have chosen this sector is the comparative advantage that Romania has in agricultural
sector due to proper land, climate and geo graphy positioning.
The study case is structured in three chapters. The first one is the introduction, in order
to present on overview on Romanian agricultural sector. The second chapter places Romania in
European Union context, emphasizing the agrifoo d sector. The third chapter is the scenario
analysis which statistically prove the positive effects of the European Union membership on
the Romanian agricultural sector, comparing it with a no accession scenario. Moreover , it
presents a decrease in selling price of several crops, relevant for Romanian market. The thesis
ends with conclusions and discussions that result from the entire paper work.
9
PART I: THEORETICAL APPROACHES
I. Theoretical Approaches in Contemporary International Trade
For achieving a goal, each company/country has to take advantage of the opportunities
and to pass the challenges met on the way. According to the Cambridge dictionary, an
opportunity is “an occasion or situation that makes it possible to do somethi ng that you want to
do or have to do, or the possibility of doing something”1 and a challenge is “the situation of
being face with; something that needs great mental or physical effort in order to be done
successfully and therefore tests a person’s ability ”2. The actors have to be aware of
opportunities and challenges, in order to be able to adapt as quick as possible to the new context.
If the opportunities can have a positive effect on the entity, an ignored challenge could attract
failure and even bankru ptcy.
There doesn’t exist a list that fit to all companies/countries, because opportunities and
challenges are different to each, depending on the specificities of the entities. Furthermore, a
challenge for a company/country represents an opportunity for others, and reciprocal. From
theoretical point of view, it’s possible to construct a framework to identify the challenges and
opportunities that will occur in the following period and will have a considerable influence on
the global level, to one and all.
1.1. Overview Regarding The Global Economy – Opportunities And Challenges
1.1.1. General Economic Framework And The Global Future Conditions
In the future period there are expected several changes at the world level. They could
be seen as opportunities, but especially as challenges, because of their diff icult to predict
characteristic . Food security, unemployment and problematically healthcare systems are
through the first concerns. As written on “Word Economic Forum”, the population is exp ected
to incr ease to 9 billion people by 2050. It means that the demand for food will increase to 60%,
compared to this moment.3 UN has already taken into consideration this problem. Thus, their
second of a total 17 Sustainable Development Goals for 2030 i s promoting sustainable
1 http://dictionary.cambridge.org/dictionary/english/opportunity , accessed on 05.11.2016.
2 http://dictionary.cambridge.org/dictionary/english/challenge , accessed on 05.11.2016.
3 Rosamound Hutt. (21 January 2016). What are the 10 biggest global challenges?.
https://www.weforum.org/agenda/2016/01/what -are-the-10-biggest -global -challenges/ , accessed on 05.11.2016.
10
agriculture. In order to succeed, it’s a need to adopt an efficient business model and to forge
public -private partnership. The failure means hunger and conflict. Americans policymakers
sustain that there is a link between the pover ty and conflict. 4 The healthcare system has to adapt
to this increase focusing on the poorest countries and the increasing number of elderly . Even
now, many industries find difficult to hire qualified stuff. Nearby 500 million new jobs have to
be created by 2020.
Gender equality isn’t just about the morality. It also influences the economy through the
increasing number of women involved in different and various fields.
Climate, energy and the environmental security represents another future challenge. I n
the last 50 years, the average land temperature has increased with 1°C, because of huge
quantities of gas emission. The impact is seen already through frequent and intense droughts
and storms. If the fluctuation will not limited to 2°C, the result will b e catastrophic. Therefore,
each country will implement his own climate action plan.5 There is a need to provide low
polluting and secure energy sources, decreasing the gas emissions and the dependency on the
limited resources (e.g. fossil fuels).
Rising income inequality represents the factor that cause economic and social ills,
influencing the well -being of the economy. In order to go beyond this situation, the economic
activity should bring benefits to everybody in the society. The future doesn’t appear hopeful:
technology is expected to improve productivity by 30%; it means 50% of workers will be at
risk at being displaced.6
Nowadays, almost everything is connected a nd this will influence how we make
business and manage resources. At the same time, this connected life affect s personal privacy,
data security and personal relationships.
International trade and investment, the global imbalances and rise of new powers are
subjects that are very often discussed, when it comes to challenges. Foreign direct investment
is a well -known technique of making business at international level. Because of the fast growth
4 (1 February 2007). Top Ten Global Economic Challenges: An Asse ssment of Global Risks and Priorities.
https://www.brookings.edu/research/top -ten-global -economic -challenges -an-assessment -of-global -risks -and-
priorities/ , accessed on 05.11.2016.
5 Hutt Rosamound. (21 January 2016). What are the 10 biggest global challenges?.
https://www.weforum.org/agenda/2016/01/what -are-the-10-biggest -global -challenges/ , accessed on 05.11.2016.
6 Idem
11
of the digital economy and in order to meet the fundamental changes, the regulations and
agreeme nts should evolve with the same speed. Unfortunately this is not happening.
Despite the fact that we get by the crisis, the government’s budgets are still constrained.
It means a barrier for long -term investments, which influence the global growth. This is because
of the lack of trust and confidence in financial institutions, caused by the crisis. The challenge
is to create an accessible and trustful financial system. At the same time, there is a pressure at
global level because of the changes in the dist ribution of power between USA and China and
oil exporters.
Although there are numerous challenges, we could identify also opportunities. Private
sector increases its influence around the world. Globalization enlarge the market place and
brings benefits n ot only for sellers, but also for buyers. The products are more diversified, being
sold at accessible prices. The producers succeed in increasing the efficiency, by reducing the
costs, mostly through outsourcing and FDIs. Multinational corporations span th e globe and
spread many opportunities. Nowadays, emerging markets represents an appeal place for making
business, because of their rapid growth, huge middle classes and large reserves of raw materials
and natural resources. Anyway, the companies that are interested to invest in an emerging
market, have to be careful as regards political instability, legal system, intellectual property
protection, transparency, infrastructure, partner qualifications and dominance of family
conglomerates.
The project “One Wo rd, One Future” presents the Ireland’s policy for international
development, available from 2015 and elaborated for the next 4 years. There document’s name
is “Africa Strategy” and descript the two way trade investment link between Ireland and African
coun tries.7 Africa has experienced a shift from agriculture to manufacturing and services, which
could be seen as a rapid economic growth, but still there is extreme poverty and vulnerable
population, which could be translated in low labor cost. On the other h and, Africa is known for
its resources that are compulsory and desirable for everyone, taking into consideration the
climate change and the scientists predictions.
Nevertheless, the discrepancy between economic, social, environmental and political
dimens ions reduces the attractiveness to strategic joints in African countries . The challenges
7 Murphy Susan, Walsh Patrick Paul, The Challenges and Opportunities Presented by Trade Partnership
between Africa and Ireland”, http://www.ucd.ie/spire/filestore/MurphyWalsh_1st%20proof.pdf , accessed on
05.11.2016.
12
are represented by conflict interest and tensions, weak regulations and limited powers of
enforcement. Other challenges that generate from this partnership, comes from the Ireland
government: “It marks a substantial change in the types and forms of duties and responsibilities
that the Irish government must now consider”.8
In order to change the African business context and at the same time to increase the
people’s stan dard of living, the report requires transformative shifts:
– Leave no one behind
– Put sustainable development at core
– Build peaceful and effective, open and accountable institutions for all
– Forge a new global partnership on the basis of solidarity.9
Africans benefits take shape of the stability, peace, transparency and reduction of
hunger. In the case of Ireland we can talk about a new appealing market, but also an eligible
area for setting up factories in the future.
Social and cultural differences may represent a barrier in business relationships.
Through diplomacy could be established relationships between countries in order to enhance
the economy. An example is the contact between Italian companies, represented by Berlusconi
and Saudi Arabian countri es. With the help of his diplomatic talks, he succeed in increasing the
Italy’s international influence and prestige. 10
The geo -political configurations have a major impact on transnational corporations. For
example, McDonald from Russia, failed to perfor m its activity due to “confrontation between
Russia and the West on the matter of the Crimea Issue”11
In order to protect the transnational corporations, which are not responsible for home
country’s political actions, the legal status and the immunities of transnational corporations
should be defined by the Geneva Conventions.
8 Murphy Susan, Walsh Patrick Paul, The Challenges and Opportunities Presented by Trade Partnership
between Africa and Ireland, http://www.ucd.ie/spire/filestore/MurphyWalsh_1st%20proof.pdf , accessed on
05.11.2016.
9 Idem
10 Saari Danial, Adibayeva Aigul, To the question of perspec tives and challenges in contemporary international
trade diplomacy, http://csjournal.ca/to -the-question -of-perspectives -and-challenges -in-contemporary –
international -trade -diplomacy/ , accessed on 05.11.2016.
11 Idem
13
1.1.2. The Role Of IMF In The Post-War World Economy
Global level opportunities are sustained by IMF and world bank, promoting the
expansion of trade and employment, maintaining int ernational financial stability (which is
essential for open world trading system) and enhancing the economic development.
The expansion of the global trade in the postwar period generates growth in most parts
of the world. Due to the growth, infant morta lity rates fell sharply and the Chinese literacy rates
has risen to 91% in 2000 (taking into account that in 1973 the percentage was only 53%). The
last, but not the least, the life expectancy has risen with approximately 30% in 2005, compared
to 1995.12 This progress wasn’t universal. In Russia, some parts of the Eastern Europe and Sub –
Saharan African countries, the life expectancy has declined because of HIV/Aids infection.
This rapid growth represents one of the benefits of globalization. Furthermore, the
collapse of Communism influenced the performance of world economy and IMF’s work. In
order to help the countries to recover or to pass some “normal” challenges, IMF lent money to
members that faced short term difficulties, while World Bank made loans o n longer terms for
particular problems. In my opinion this was a great opportunity.
The experience gained during Mexico crisis from 1994, followed by Asia in 1997 and
Russia in 1998, is compulsory for IMF in implementing economic policies that foster grow th
and prevent crisis. Capital account crisis displays the need for learning because of the changing
world. IMF has learned about the importance of a sound macroeconomic framework and to
look at the sustainability of public sector debt. The third lesson im ply the flexibility and the last
lesson regards the link between national policy -making and the Fund’s work. 13
The process of global integration generates development in communications and
transport technologies. This could be translated into falls of costs and changes in the structure
of the international trade and investments. The most rapid economic growth occur s in China
and India, very populous nations.
12 https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp050206 , accessed on 05.11.2016.
13 Idem
14
1.2. The Developments Of The International Trade During The Last Decades
1.2.1. International Institutions In Charge With International Trade
Nowadays, like never bef ore, the international trade is defined by a very high frequency
and is carried out at worldwide scale. In order to enhance the trade, there was founded in 1947
General Agreement on Tariffs and Trade (GATT). Among the institutions from Bretton Woods:
World Bank and International Monetary Fund, t here was the need to create a third organization
to be responsible of the international cooperation between the states. GATT was a multilateral
trade agreement through which were established rules and fundamental principles to be kept by
member countries i n international trade relationships. The objectives of the GATT were to
develop the international trade by reducing custom duties, eliminating tariff and non -tariff
barriers and promoting liberalization, coordination and control of the global trade. The ei ght
rounds of negotiations GATT were the follo wing, presented in the Table 1.
Table 1: The eight rounds of GATT
Name Year The results
Geneva Round 1947 the average reduction was about 35%
Annecy Round 1949 the average reduction was about 8%
Torque Round 1951 reducing taxes by another 25%
Round Geneva 1956 the average level of fees was reduced by a further
8% (each) Dillon Round 1960 -1961
Kennedy Round 1964 -1967 a further 35% reduction in the level of fees; the
average thereof reached about 10%
Tokyo Round 1973 -1979 customs duties were reduced on average by 30%
Uruguay Round 1986 -1994 the most complex , generating a fundamental base
for WTO
Source: Giurgiu Adriana, Comer ț intern ațional și polictici comerciale , Editura Universității din Oradea, Oradea,
2008.
According to the T able 1, during the Uruguay Round were established the followings:
the increasing degree of security for the entrance of the products on the market, not only the
reduction of the custom duties for industrial products in developed countries, but also a general
15
reduction in order to enhance the export of African, Latin American and Asian countries and
28 regional agreements either for specific products or regarding the regional integration. 14
Since 1st of January 1995, World Trade Organizat ion (WTO) has replaced the GATT.
WTO keeps the GATT agreements, but has a larger scope than it , increasing its involvement,
facilitating the implementation of agreements and creating a forum for negotiation, available
for its members. WTO has a permanent basis and require a more intense activity of its Ministers.
A ministerial conference is held every two years.
United Nations Conference on Trade and Development (UNCTAD) and Organization
for Economic Cooperation and Development (OECT) should be mentioned when talking about
institutions that are involved in developing of the international trade . The sco pe of both is to
push on the economic expansion, mainly of the developing countries. UNCTAD is a part of the
United Nati ons. In order to meet its goal, there was conceived the General Scheme of
Preferences (GSP), which consist in eliminating or substantial ly reducing the custom duties for
the export of developing countries. 15
1.2.2. The Proliferation Of The Free Trade Agreements
Free trade zone represents specific regions in which the imports and exports between
the countries are carried out with no cus tom duties. The countries are interested in developing
free trade agreements to increase the prosperity of the national economies. When tariffs are not
eliminated there could be implemented preferential trade agreements for specific products for
the countr ies that sign the agreement.
Accor ding to WTO statistics, in the T able no. 2 are represented the most important trade
agreements in the world. There are several types of agreements. Free trade agreement is the
general term for suggesting that there ar e no custom duties between the countries. Customs
union means a group of countries with free trade zone and common external tariffs. Economic
integration is the most complex agreement, reducing or eliminating the trade barriers between
different regions and coo rdinating monetary and fiscal policies. Partial scope agreement is a
preferential one, being implemented for specific products. 16
14 Giurgiu Adriana, Comer ț internațional și polictici comerciale , Ed. Universității din Oradea, Oradea, 2008, p.
111-115.
15 Idem, p 122 -127.
16 http://www.investopedia.com/terms /f/free_trade_area.asp , accessed on 03.12.2016.
16
Table 2: Regional Trade Agreements
Name Signatories Type Date of
entry into
force
Andean
Community
(CAN) Bolivia ; Col ombia; Ecuador; Peru; Venezuela Customs
Union 25-May-
1988
ASEAN –
Australia –
New Zealand Australia; Brunei Darussalam; Myanmar;
Cambodia; Indonesia; Lao People's
Democratic Republic; Malaysia; Philippines;
Singapore; Viet Nam; Thailand; New Zealand Free Trade
Agreement &
Economic
Integration
Agreement
01-Jan-
2010
ASEAN Free
Trade Area
(AFTA) Brunei Darussalam; Cambodia; Indonesia;
Lao People's Democratic Republic; Malaysia;
Myanmar; Philippines; Singapore; Thailand;
Viet Nam Free Trade
Agreement
01-Jan-
1993
Asia Pacific
Trade
Agreement
(APTA) –
Accession of
China Bangladesh; China; India; Korea, Republic
of; Lao People's Democratic Republic; Sri
Lanka Partial Sco pe
Agreement 01-Jan-
2002
Central
American
Common
Market
(CACM) Costa Rica; El Salvador; Guatemala;
Honduras; Nicaragua Customs
Union
04-Jun-
1961
EFTA –
Accession of
Iceland Iceland; Liechtenstein; Norway; Switzerland
+ Albania , Bosnia -Herzegovina , Canada ,
Central American State, Chile , Colombia ,
Egypt , Gulf Co -operation Council , Hong
Kong , Israel , Jordan , South Korea , Lebanon ,
Macedonia , Mexico , Montene gro, Morocco , Free Trade
Agreement 01-Mar-
1970
17
Palestinian National Authority , Peru, Serbia ,
Singapore , Southern African Customs Union ,
Tunisia , Turkey , Ukraine
EU (28)
Enlargement Austria; Belgium; Bulgaria; Croatia; Cyprus;
Czech Republic; Denmark; Estonia; Finland;
France; Germany; Greece; Hungary; Ireland;
Italy; Latvia; Lithuania; Luxembourg; Malta;
Netherlands; Poland; Portugal; Romania;
Slovak Republic; Slovenia; Spain; Sweden;
United Kingdom Customs
Union &
Economic
Integration
Agreement 01-Jul-
2013
Latin
American
Integration
Association
(LAIA) Arge ntina; Bolivia ; Brazil; Chile; Colombia;
Cuba; Ecuador; Mexico; Paraguay; Peru;
Uruguay; Venezuela Partial
Scope
Agreement
18-Mar-
1981
North
American
Free Trade
Agreement
(NAFTA) Canada; Mexico; United States of America
Free Trade
Agreement &
Economic
Integration
Agreement 01-Jan-
1994
Source: http://rtais.wto.org/UI/PublicSearchByCrResult.aspx , accessed on 04.12.2016.
1.2.3. From Custom Union To Regional Economic Integration
The general tendency of countries, on global level is to integrate in order to take
advantages in what regards customs duties, free movement of people and other mutual benefits.
The countries from West Europe are the only one that succeed in doing this.
The European Economic Community was established by the treaty of Rome, signed in
1957. This was the first step for eliminating the trade barriers between most of the European
countries. Nowadays, European Union is customs union. “This means that:
no customs duties are paid on goods moving between EU countries
all apply a common customs tariff for goods imported from outside the EU
18
goods that have been legally imported can circulate throughout the EU with n o further
customs checks. ” 17
Moreover, the EU has concluded free trade agreements with several non -European
countries, like: Northway, South Africa, South Korea, Switzerland, Turkey, etc.
EU controls the exports and imports of each member country through trade quantitative
restrictions or tariff -rate quota. Community establishes the maximum quantities that could be
exported or imported in a certain period of time. It is not applicable for finished products or for
the products that are already controlled. 18
The European Commission issues a notification to inform the quotas and indicate the
procedure of allocation: first -come, first -served, proportional quota to the demanded quantity
or historical importer/exporter. 19
The import and export licenses authorize the import or export of the products that are
within the quotas. The defence measures are an ti-dumping rules, anti -subsid y policies and
safeguards. The anti -dumping investigation starts when a European country/ comp any
complains about this at the Community. The subsidies are put forward by the governments in
order to help a certain industry from home country to be competitive at international level. The
EU can impose duties to diminish the effect of the subsidy. Safe guards regard the sudden
increase in imports and their role is to give a temporary breath to the industry. 20
Promotional and stimulating measures could include one country, a region within a
country or a group of countries. The economic improvement is a chieved by the increase in
exports, relative to imports. The EU supports the exporters to reduce non -tariff barriers, to
access on a new market and to be more informed.
17http://exporthelp.europa.eu/thdapp/display.htm?page=rt/rt_EUCustomsUnion.html&docType= main&languageI
d=EN , accessed on 04.12.2016.
18 https://ec.europa.eu/taxation_customs/business/calculation -customs -duties /what -is-common -customs –
tariff/tariff -quotas_en , accessed on 05.12.2016.
19 Giurgiu Adriana, Comer ț internațional și polictici comerciale , Ed. Universității din Oradea, Oradea, 2008, p.
149.
20 http://ec.europa.eu/trade/policy/accessing -markets/trade -defence/actions -against -imports -into-the-eu/,
accessed on 05.12.2016.
19
II. International Trade Theories
International trade theories are different point s of view for defining international trade.
Economists try to explain the features of international trade, the reason why a country is
wealthier than other and to construct a framework, a model for a “healthy”, efficient and
effective international trade s ystem. The trade is very important for an economy because of the
difference between labor, labor skills, natural resource, technologies and physical capital
between countries and because of the economies of scale that could be generated by extending
the target market.
2.1. Classic Theories
2.1.1. Mercantilism
Mercantilism was the first effort for developing an intern ational trade theory, in XVI –
XVIII centuries. It marks the beginning of the economic science. The term Mercantilism was
introduced by Adam Smith, describing an economic system that sought to enrich the country
by increasing the exports and decreasing the imports, in other words, to have a trade surplus.
The main idea is that the wealth comes from trade and from interdependencies between
coun tries. Wealth is represented by the amount of the silver and gold. In order to restrain the
imports, the protectionism policy was instituted. This strategy is used also nowadays. 21
Mercantilism has emerged because of the first centralized states, the development of
international trade, the geographical discovers and the enrichment desires and individualism.
The ideal form of wealth was money and precious metals, from which they were made. The
increas ing of the wealth was the main objective, not only for state, but also for individuals and
in order to achieve this, any method was acceptable. As written before, from their point of view,
the mail source of wealth is the surplus of the foreign trade. Merc antilism lost sight of the fact
that, from a broader perspective, the trade has two parts: the seller and the buyer and if each
country tries to reduce the imports, the increasing of exports is impossible. 22
Mercantilism had three stages: early mercantili sm, mature mercantilism and old
mercantilism. The first one was promoted by Spain, Portugal and England in XVI century. The
21 LaHaye Laura, The concise encyclopedia of economics – Mercantilism.
http://www.econlib.org/library/Enc/Mercantilism.html , accessed on 05.12.2016.
22 Dodescu Anca,Pop Cohut Ioana, Doctrine Economice, Ed. Universitatii din Oradea, Oradea, 2014, p 43 -47.
20
mature mercantilism, or the trade balance, have spread in England, France and Germany. The
late mercantilism is specific for England and mark the transition to economic liberalism.
Although it is an old trade theory, it is still observable in countries like Japan, China,
Singapore and even Germany, which encourage the exports and limits the imports through
protectionism, restrictions and subsidies policies. 23
2.1.2. Absolute Advantage Theory And Comparative Advantage Theory
In XVIII century, Adam Smith offer a new theory, called absolute advantage theory,
which is based on the ability of one country to be more efficien t in production of a good, than
another. He is promoting a non -regulated trade, arguing that the trade should flow naturally,
depending on the forces from the market. If a country produces faster and at a lower price a
product that another country, it mean s that the first country has an advantage and should
specialized at producing that good. Through specialization, the labor will be more efficient and
the technology will be developed in that industry. Furthermore, the both countries will benefit
from this. He stated that a country should not be judged by the wealth, but by the standard of
living. 24
David Ricardo introduce the theory of comparative advantage in 1817 , in his book: “On
the Principles of Political Economy and Taxation ”. A country could have absolute advantage
at producing the most of the goods and another at none. Ricardian model for trade explains that
it doesn’t matter if a country has an absolute advantage in produce two goods, it has a
comparative advantage in respec t to another nation, in producing only one good. Even if a
country is most or less efficient producer of all goods, it will still benefit from trade. For
example, China’s comparative advantage in respect to United States is materialized in cheap
labor, whi le the United States’ comparative advantage is in specialized, capital intensive
labor.25
The Ricardian model uses the concept of opportunity costs. The opportunity cost of
producing something measures the cost of not being able to produce something else with the
same resources. It means that a country has a comparative advantage in producing a good when
23 http://2012books.lardbucket.org/books/challenges -and-opportunities -in-international -business/s06 -01-what -is-
international -trade -th.html , accessed on 05.12.2016.
24 Schumacher Reinhard, Adam’s Smith theory of absolute advantage and the use of doxography in the history of
economics , Erasmus Journal for Philosophy and Economics, Volume 5, Issue 2, Autum 2012, p 54 -80,
http://ejpe.org/pdf/5 -2-art-3.pdf , accessed on 25.12.2016.
25 http://www.investopedia.com/terms/c/comparativeadvantage.asp , accessed on 09.01.2017.
21
the opportunity cost for producing that good is lower for a nation than in other countries. He
explains this using concrete examples and numbers. In his w riting is compared England and
Portugal, producing wine and cloths, using labor, the exclusive mean of production. He
assumed that Portugal has an absolute advantage in producing both goods. David Ricardo
demonstrated that it is benefic to both countries t o trade if each of them specialized in producing
the good in which it has a comparative advantage, having a lower opportunity cost than the
other. In other words, Portugal will produce the good in which it is “the best” and England will
produce the good in which it is “least worse” at producing.26 As a result, more goods will be
produced and consumed, the welfare of the national, but also individual level will increase, by
increasing the wages and there will be a win -win situation. 27
Even if the Ricardian m odel, concluded in the increasing of the real incomes of the both
countries, seems very clear and simple, Paul Krugman, in his work from 1996, “Ricado’s
difficult idea” explains that it is not as easy as it looks like. Krugman states that the comparative
advantage may fail in practice. Through the first arguments there is the one regarding the
distribution of income. An increase in the national income, doesn’t suggest that all the
population is better off. Because of the distribution of income, large groups could be hurt. An
increase in productivity doesn’t mean necessarily an increase with the same percentages in the
level of wages. David Ricardo assumed that the labor will move from one industry to another,
depending on the comparative advantage that the c ountry has, moreover, having higher
incomes. This assumption fails because of the impossibility to adapt someone who has worked
in a specific industry, to another that have different specificities, and demanding different
skills.28
As predicted by Ricardo , the last three decades are characterized by an increased level
of globalization and integration and higher global trade volumes and the dynamics of the supply
chain. The entire world has moved to a specialized universe of competitive advantage. China
has entered in The World Trade Organization and many developed countries have shifted to
free trade market economies. Having an overall look to the world economy, we can observe
that in China are produces almost all low -end consumer good, Thailand is known as being one
of the mail producer of electronic components, and India is in charge with the services of the
26. Suranovic Steven M, International Trade Theory and Policy, http://internationalecon.com/Trade/Tch40/T40 –
0.php , accessed on 09.01.2017.
27. Krugman Paul R, Maurce Obst feld, Marc J. Melitz, International economics – theory and policy, Ed. Pearson,
2012.
28. Krugman Paul R, Ricardo’s Difficult Idea. http://web.mit.edu/krugman/www/ricardo.htm , accessed on
26.01.2017 .
22
information technology. These specialized companies, concentrated in specific countries, are
surviving because of the economies of scales generated. T hey also represent one of the sources
of profitability for the big multinationals.
Huge financial opportunities are produced by a combination between the specialized,
globalized production and the just in time inventory. This just in time inventory has i ts
weaknesses, being very sensitive to political and government instability, natural disasters and
exchange -rate volatility. One example is the flooding from Thailand in October 2011. It has
destroyed a key global producer of disk -drive and Thailand produc es “70% of the world’s hard
drives.” 29
The Ricardo’s theory of comparative advantage also implies some negative effects. In
this interconnected and advanced economy, with companies that have subsidiaries or outsource
all over the globe, a negative event from one source country, could freeze the businesses from
other countries, having consequences at world level, in a very short time. The idea is that
companies that have high degree of specialization and just in time inventories, are very sensitive
to cracks in the supply chain, which nowadays is spread around the world. From another point
of view, we have to take a look at the supply chain management that has to be more flexible
and accustomed with change. Their trade networks in the international trade systems are very
difficult to control and to rely on. They are very efficient but at the same time, very fragile.30
Lafay Index is “an index of specialization or revealed comparative advantage that
takes account of both exports and imports and is therefore more suitable for a country
with intraindustry trade. Due to Lafay (1992). This index for country i good j is LIij = 100[( Xij-
Mij)/(Xij+M ij)-Sk(Xik-Mik)/Sk(Xik+M ik)](Xij+M ij)/Sk(Xik+M ik) where X and M are exports and
imports. ”31 As written in the above table, we can observe that China has a comparative
advantage in producing raw materials, compared to Russia, US, Brazil, Japan and India. At the
same time Russia has a comparative advantage i n regard to US and US has a comparative
advantage in regard to Brazil.
29 http://www.supplychainquarterly.com/columns/20121001 -ricardos -comparative -advantage -still-holds -true-
today/ , accessed on 28.01.2 017.
30 Idem
31 http://www.dictionarycentral.com/definition/lafay -index.html , accessed on 28.01.2017.
23
Table 3: Comparative advantage in raw materials and Lafay Index
Extra EU trade of raw materials – LAFAY INDEX
Last update 01.04.16
Extracted on 06.12.16
Source of data
Eurostat32
PARTNER/TIME 2010 2011 2012 2013 2014 2015
Russia -1 -1 -1 -1 -1 -1
United States -2 -2 -1 -2 -2 -2
Brazil -4 -4 -3 -3 -3 -3
China (except Hong Kong) 2 2 2 2 2 2
Japan 0 0 0 0 0 0
India 0 0 0 0 0 0
Source: Created by the author, based on statistical data available on http://ec.europa.eu/eurostat/data/database ,
accessed on 06.12.2016.
2.2. Competitive Advantage Theory
Competitive advantage is “a superiority gained by an organization when it can provide
the same value as its competitors but at a lower price, or can charge higher prices by providing
greater value through differentiation. Competitive advantage results from matching core
competencies to the opportunities. ”33
The companies create superior conditions that increase the sales or the margins,
compared to the competitors. Comparative advantage could be generated by the brand of the
company, costs structures, qu ality of the products/servic es, intellectual property, distribution
network , economies of scales, locations of production in areas with lower labor cost or an
efficient internal system . Depending on the level of the sustainability of the competitive
advantage, the competitors could r educe or not the advantage. The competitive advantage could
be defined in two ways: cost advantage and differentiation advantage. The cost advantage is
when the products of a company are sold at a better price that the others and the differentiation
advantage is when a company sells different products from the competitors. Competitive
advantage shows its effects where substitution i s difficult and where the future goals are
improved by the research and development. Amazon.com is an example of the company that
has sustainable competitive advantage, derived from the e -commerce platform, distribution
32 http://ec.europa.eu/eurostat/data/database , accessed on 06.12.2016.
33 http://www.businessdictionary.com/definition/competitive -advantage.html , accessed on 31.01.2017.
24
network and the rela tionships with i ts vendors. It outperforms the competition through a better
price for the customers.
Differentiation advantage is generated by the products/services of a company that differ
from the competitors. Differentiation advantages can be created by the “advanced technology,
patent -protected products or processes, superior personnel, or a strong brand identity .”34
Michael Porter in his book from 1985, “Comparative advantage” addresses some critics
to comparative advantage. He sustain that cheap labor and natural r esources are not compulsory
for a good economy. Economies of scale that generates lower costs are considered to be
essential from Porter’s point of view. In my opinion, I agree more with Michael Porter than
David Ricardo because the international trade hav e changed a lot in the last years and nowaday s
in this changing, connected and saturated economy there is a need for diversification and for
adaptability to the more and fluctuating needs of the customers.
"A firm is said to have a competitive advantage when it is implementing a value creating
strategy not simultaneously being implemented by any current or potential player" .35 According
to Jay Barney, a firm competitive advantage is a core competence that provides value to the
products/services, is unique or rare on the market, difficult to imitate and there are not
equivalent substitutes. The implemented business strategy has to manipulate the resources in
order to gain the competitive advantage that is recognized through the results of the company,
outpe rforming the competitors.
There are three business strategies that create and improve the firms’ competitive
advantages. Cost leadership strategy refers to the ability to produce the same product at a lower
cost, compared to competitors. For this, Porter recommends low cost labor, locations and
materials. Another process that reduces the prices of the products/services on long term and at
the same time develops the company’s added value activities is vertical integration. The second
strategy is the diffe rential one, which refers to products/services that are different from the
competitors. This requires high emphasizes on research and development and innovative ideas,
in order to make the customers prefer the outcomes and to pay more for the benefits prov ided.
The last one is the focus strategy. As the name suggests, this strategy makes the business to
target few niches rather than everyone. This is appropriate for small businesses that segments
34 http://www.investopedia.com/terms/c/competitive_advantage.asp , accessed on 31.01.2017.
35 Barney Jay, Firm Resources and Sustained Competitive Advantage,
https://business.illinois.edu/josephm/BA545_Fall%202011/S10/Barney%20(1991).pdf , accessed on 11.02.2017.
25
the market, finds the perfect balance between the quality and price and focus on the
improvement of the daily lives of the customers. It is needed a flexible firm that often sells
customized products.36
The Porter Diamond of National Advantage is a framework created by Michael Porter
in order to help the understanding of the competitive advantage of nations. The factors
represented i n the diamond could develop the country’s position in t he global economic
environment, by creating new advantages. 37
Figure 1: The Porter Diamond
Source: https://www.google.ro/search?q=porter+diamond&espv=2&biw=1366&bih =589&source=lnms
&tbm=isch&sa=X&ved=0ahUKEwiz3YPAzbTRAhUrBsAKHT6jDU0Q_AUIBigB#imgrc=m89l –
RqgbYaIEM%3A , accessed on 05.12.2016 .
As represented in the Figure no.1, the factors that influence the competitiveness of a
nation at international level are the followings: factor conditions, demand conditions, related
and supporting industries and strategy, structure and rivalry, chance and government.
Factor conditions refer to different types of resources or capabilities that are present in
that country and could be transformed from national competences into international
competences. They can be natural or created (for example, skilled labor or advanced technology
for research ). Demand conditions , that refer to size of the market, market growth, sophistication
36 Vitez Osmond, Competitive Business Strategies , http://smallbusiness.chron.com/competitive -business –
strategies -4623.html , accessed on 11.02.2017.
37 http://www.investopedia.co m/terms/p/porter -diamond.asp , accessed on 05.12.2016.
26
and the level of the demand in a specific industry , influence the level of development of the
process es of production and the innovation . The conditions from the home co untry shapes the
industry, preparing it for international market.
Related and supporting industries enhance internationalization at later stages of the
value chain, through competitive suppliers. This is compulsory for innovation and for the
upgrading pr ocess. Firm strategy, structure and rivalry determine the way the companies from
the country are established, organized and managed. The increasing rivalry in an industry
creates pressure and triggers firms to be more innovative in order to upgrade the com petition.38
Government has a strong influence of the firms. It influences all five other factors from
the Porter Diamond model through his interventions. It could hinder or promote export, change
the deman d or supply conditions, even intervening in the com petitions between firms. The last
element of the Porter Diamond model is chance. It refers to random events that does not depend
on the companies’ control. This is a very important element at international level, because these
discontinuities could lead to advantages for some companies and to disadvantages to others.
Even if this elements seem to be independent, they must be seen connected and as a
whole. In fact, they are strongly interrelated. 39
Going deeper, in order to assess the profitability of an industry, Michael Porter identifies
another variables and creates a framework , as seen in Figure no 2.
Figu re 2: The structural determinants of the five forces of competition
Source: Created by the author
38 http://theses.univ -lyon2.fr/documents/getpart.php?id=lyon2.2009.sureephong_p&part=225242 , acces sed on
05.12.2016.
39 https://marketing -insider.eu/porter -diamond -model/ , accessed on 11.02.2017.
INDUSTRY
RIVALRY
THREAT OF ENTRY
SUPPLIER POWER
THREAT OF
SUBSITUTES
BUYER POWER
27
Porter’s Five Forces Analysis suggests the five strong influences that affect
competition: supplier power, buyer power, competitive rivalry, the threat of substitution and
the threat of new entry. In practice there are more features of an industry that a ffects the level
of profitability and the intensity of the competition. The figure suggest “horizontal”
competition: from substitute s, from new entrants and from established rivals; and sources of
“vertical” competition: the power of buyers and the power o f suppliers.
The supplier power and buyer power refers to price sensiti vity and bargaining power.
The companies in an industry compete in markets for outputs and market for inputs. In both
markets there is created value that is shared between the sellers and buyers, depending on their
relative economic power. Threat of entry is influenced by the capital requirements, economies
of scale, absolute cost advantages, product differentiation channels, government and legal
barriers and retaliation by established producers. If an industry is profitable and earns a high
return on capital, it will act like a magnet for the outside firms. Threat of substitutes are
represented by the buyer propensity to substitute and relative prices and performance of
substitutes. The price that the customers are willing to pay depends on the availability of the
substitutes. The existence of close substitutes means that customers will switch from one
product to its substitute, in response to a price change. The industry rivalry is ass essed, taking
into co nsideration concentration of the competition, diversity of competitors, product
differentiation, excess capacity and exist barriers and cost conditions.40
If we can forecast changes in industry structure, we can predict likely impact on
competition and profitability. Once we know which structural features of the industry support
profitability and which depress profitability, we can choose a favorable position in the industry.
Porter assumes that industry structure drives competition be havior and is stable, but competition
also changes industry structures. Schumpeterian Competition states: “perennial gale of creative
destruction”41, which means that innovation overthrown the market leaders. Furthermore, the
hypercompetition process is an “intense and rapid competition moves…continuously creating
new competitive a dvantages and destroying existing competitive advantages”.42
40 Grant Robert M., Contemporary Strategy Analysis, Seventh Edition , Ed. John Wiley & Sons, L td, UK, 2010, p
69-78.
41 http://www.econlib.org/library/Enc/CreativeDestruction.html , accessed on 11.02.2017.
42 https://en.wikiquote.org/wiki/Richard_D%E2%80%99Aveni , accessed on 11.02.2017.
28
III. European Union and The Romania’s External Trade Integration
3.1. The Common Commercial Policy
The commercial policy refers to the “regulations and policies that determine how a
country conducts trade with other countries. A country's commercial policy includes the use of
tariffs and other trade barriers, such as restrictions on what goods can be im ported or exported,
and which countries are allowed to import or export goods to the home country. ”43 In the case
of the European Union, the member countries have a unique commercial policy which
establishes how they interact with non -member countries.
Commercial policies represent a point of contention for international trade; this is one
of the reasons for the existence of the World Trade Organization and other organizations with
the same scope.
The instruments of the commercial policy could be classif ied in two categories:
regulations and subsidies and instruments that promote certain industries. Regulations include
tariff policy (import and export tari ffs) and non -tariff restrictions which refer to quantitative
restrictions (differential exchange rate s, import and export quotas, etc.). Subsidies are used to
enhance some industries in order to increase exports or to replace imports. Governments also
intervene through technological support and promoting international commercial relations.
Commercial agr eements between countries are also divided in several categories.
Bilateral agreements represent the a greements between two countries that concretize in the
reduction of the import tariffs or other restrictions to imports by one country for the products
imported from a second country. The second country does the same with certain products from
the first country. Free trade agreements eliminate or reduce the commercial barriers between
two or more countries. Custom unions refer to a group of countries that u nite the external
custom tariffs, making agreements about its internal tariffs. Free economic areas are areas
where a lot of commercial regulations are expelled. Even the movement of the factor of
production is liberalized. European Union has adopted a uni que currency and has released the
movement of the factor of production.44
43 http://www.investopedia.com/terms /c/commercial -policy.asp , accessed on 20.02.2017.
44 http://economicpoint.com/commercial -policy , accessed on 20.02.2017.
29
The European Union represents a unique political and economic union between the 28
member states. It was created as a consequence of the Second World War. The scope is to
enhance t he economic cooperation, through the interdependence between the countries
involved in trade with one another. As a result, there was created in 1958, the European
Economic Community (EEC). The first member countries were: Belgium, France, Italy,
Germany, Luxembourg and the Netherlands. That was the beginning of a giant single market
that still develop toward the full potential.
Even if it has begun with an economic scope, EU has diversified its span, covering
aspects as: climate, health, environment, ext ernal relationships, security, migration and justice.
As a result, the European Economic Community has changed its name in 1993, becoming the
European Union.
EU works on the rule of law. It means that “everything it does is founded on treaties,
voluntary and democratically agreed by its member countries.”45 The representative democracy
is one of the EU principles, thus, the people are represented in the European Parliament and the
member states are represented in the Council of the EU and the European Council. The
European Council establishes the political d irections, it doesn’t have the power to pass laws.
The representatives of each country, together with the President of the Commission meets twice
every 6 months. Regarding law making, the main institution in charge with this are: European
Parliament, Counc il of the European Union and European Commission, the last one
representing the interest of the European Union as a whole. These institutions emits policies
and laws that have to be applied throughout the European Union. Generally, the Commission
suggests the laws and the Council and Parliament adopt them. The commission and the member
states implement the laws and the Commission is responsible for the application and
implementation of the laws. Other EU institutions and bodies are: the Court of Justice of the
EU, the Court of Auditors, European Central Bank, European External Action Service,
European Economic and Social Committee, Committee of the Regions, European Investment
Bank, European Ombudsman, European Data Protection Supervisor, Publications Office ,
European Personnel Selection Office and European School of Administration. EU is concerned
with the transparency and democracy of the institutions, allowing the citizens to be more
involved in the political process. 46
45 https://europa.eu/european -union/about -eu/eu -in-brief_en , accessed on 13.02.2017.
46 https://europa.eu/european -union/about -eu/institutions -bodies_en , accessed on 13.02.2017.
30
The EU promotes peace, prosperity a nd stability. It helped raise living standards and
has launched the euro, a single European curre ncy. For people from EU countries it becomes
easier to live abroad in Europe because of the freely movement of people and merchandise
throughout most of the co ntinent. Human rights are protected internally and around the world.
“Human dignity, freedom, democracy, equality, the rule of law and respect for human rights:
there are the core values of the EU.”47
In the Table no 4 are presented the 28 member countries and the membership year. We
can observe that Romania is an EU member since 2007 and that the first countries: Belgium,
France, Italy, Germany, Luxembourg and the Netherlands are members since 1958.
Table 4: European Member Countrie s and the membership year
MEMBER COUNTRY MEMBERSHIP YEAR
Austria 1995
Belgium 1958
Bulgaria 2007
Croatia 2013
Cyprus 2004
Czech Republic 2004
Denmark 1973
Estonia 2004
Finland 1995
France 1958
Germany 1958
Greece 1981
Hungary 2004
Ireland 1973
Italy 1958
Latvia 2004
Lithuania 2004
Luxembourg 1958
Malta 2004
Netherlands 1958
47 https://europa.eu/european -union/about -eu/eu -in-brief_en , accessed on 13.02.2017.
31
Poland 2004
Portugal 1986
Romania 2007
Slovakia 2004
Slovenia 2004
Spain 1986
Sweden 1995
United Kingdom 1973
Source: https://europa.eu/european -union/about -eu/countries_en , accessed on 13.02.2017.
Visionary and motivated leaders inspired the creation of the European Union. The
Founding Fathers of the EU were people with diverse occupation, but with the same ideals: a
united, peaceful and prosperous Europe. We should enumerate the followings:
Konrad Adenauer , the first Chancellor of the Federal Republic of Germany, who has
signed a treaty of friendship with France, this treaty becoming one of the milestones of
European integration.
Joseph Bech, a Luxembourgish politician that was involved in the foun dation of the
European Coal and Steel Community, set up in 1950.
Johan Willem Beyen, a politician, banker and businessman, who elaborated the “Beyen
Plan”, in 1950, a plan for European integration.
Winston Chrurchill, a reporter and British Prime Minister and a former army officer,
“was one of the first to call for the creation of a 'United States of Europe'. Following the
Second World War, he was convinced that only a united Europe could guarantee peace.
His aim was to eliminate the European ills of nation alism and war -mongering once and
for all. ”48
Alcide De Gasperi, Italian Prime Minister and Foreign Affairs Minister, was involved
in the creation of the Marshall Plan.
Walter Hallstein, the first President of the European Commission from 1957 who has
worke d for the realization of the European Common Market.
Sicco Mansholt, the first European Commissioner in charge with Agriculture.
48 https://europa.eu/european -union/about -eu/history/founding -fathers_en#box_1 , accessed on 16.02.2017.
32
Jean Monnet, a French economic and political adviser who was involved in the
“Schuman Plan”, regarding heavy industry.
Robert Schuman, French foreign minister (1978 -1952) was in cooperation with Jean
Monet.
Paul-Henri Spaak, involved in the formulation of the Treaty of Rome.
Altiero Spinelli, an Italian politician that has elaborated “Spinelli Plan” 49
The main treaties of the E uropean Union are:
The Treaty which established the European Coal and Steel Community, signed in 1951
in Paris. It has expired on 23 July 2002.
The Treaty which established the European Economic Community, signed in 1957 in
Rome.
The Treaty which establish ed the European Atomic Energy Community, signed in 1957
in Rome.
The Single European Act, signed in 1986 in Luxembourg.
The Treaty of European Union, signed in 1992 in Maastricht.
The Treaty of Amsterdam, signed on 2 October 1997.
The Treaty of Nice, signe d on 26 February 2001.50
For the creation of such a complex, huge and interconnected union, there was needed
numerous and well planned steps. As written above, the scope of the European Union was to
stop the damaging frequent and damaging conflicts between the neighbors. As a result in 1950,
the European Coal and Steel Community stated to unite, from economic and political point of
view, European countries. The founding countries of the European Coal and Steel Community
are: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. In 1957 was created
the European Economic Community or “Common Market”, by the Treaty of Rome.
As a reaction of the creation of the Economic and Economic Community, which means
no charging custom duties for trade, in 1960 -1969 was registered an economic growth.
49 https://europa.eu/european -union/about -eu/history/founding -fathers_en#box_1 , accessed on 16.02.2017.
50 http://ec.europa.eu/world/agreements/glossary/glossary.jsp#TreatiesOffice , accessed on 21.02.2017.
33
Furthermore, the countries have agreed joint control for the food production. “ May 1968
becomes famous for student riots in Paris, and many changes in society and behavior become
associated with the so -called ‘68 ge neration’.”51
In 1970 EU stared to involve in protection of the environment, including for the first
time “the polluter pays”. On 1 January, 1973, Denmark, Ireland and the United Kingdom
enlarged the European Union, but the Arab -Israeli war from 1973 gener ated economic problems
and energy crisis in Europe. Job creation and development of the infrastructure in poor areas
were through the EU regional policies. In 1979 all citizens, for the first time could elect their
members directly.
In 1981, Greece joine d the European Union and in 1986 Spain and Portugal did the
same. In 1986 was signed the Single European Act, a six years program regarding trade and
creation of the “Single Market”. 9 November 1989 marked the falling of the Berlin Wall.
Germany was again reunified after 28 years.
Europeans become closer neighbors as a result of the collapse of communism. In 1993,
the Single Market was enhanced with people, money, goods and services. The 1990s marks two
treaties: the “Maastricht” treaty on European Union in 1993 and the Treaty of Amsterdam in
1990. Austria, Sweden and Finland have joined European Union in 1995. In that period, more
and more students studied in other countries with the support of the European Union. The
communication was developed, more peo ple start using internet and mobile phones.
The day of 11 September 2001 represents the “War on Terror”, after the hijacked
airlines from New York and Washington. EU countries collaborated to fight crime. In 2000 –
2009 period more and more countries adopt euro and more than 10 new countries join the
European Union. Romania is a member since 2007. “In 2008 a financial crisis hit the world
economy. The Treaty of Lisbon is ratified by all EU countries before entering into force in
2009. It provides the EU wit h modern institutions and more efficient working methods. ”52
European Union helps countries to recover crisis and has established the “Banking
Union”. In 2012, the European Union was awarded the Nobel Peace Prize. In 2013, Croatia
become member of the European Union. The climate change produced by the gas emission i s
still an emergency for the European Union. As a consequences of the annexation of Crimea by
Russia, a new security policy is established. European Union nowadays faces problems with
51 https://europa.eu/european -union/about -eu/history_en , accessed on 16.02.2017.
52 Idem
34
the Middle East citizens. “Religious extremism increases in the Middle E ast and various
countries and regions around the world, leading to unrest and wars which result in many people
fleeing their homes and seeking refuge in Europe. The EU is not only faced with the dilemma
of how to take care of them, but also finds itself th e target of several terrorist attacks.”53
3.2. The Impact Of The Romania’s EU Membership On The External Trade
Romania’s integration is a process that has started with the adherence to the European
Union. The adherence to the European Union took place on 1 January 2007. This date was
proposed in Salonika in 2003 and confirmed at Brussels on 18 June 2004. Romania and Bulgari a
too signed the Treaty of adherence on 25 April 2005 in Luxembourg.
Romania is the first county from the Central -East region of the Europe that has official
relation with the European Community. On January 1974, Romania was included in the
European Unio n’s Generalized S cheme of Preferences, signing several agreements for the
enhancement of the trade.
The diplomatic relation between Romania and European Union has started in 1990. In
1991 was signed a Trade and Economic Cooperation Agreement, that came i nto operation on
February 1995. Romania has sent the solicitation to become member on 22 June 1995 , attached
at the Snagov Declaration, document signed by all fourteen political parties from Romania. In
1997, the Commission has published the opinion regard ing Romanian application on the
European Union. Next year, there was emitted the report about the Romanian progression in
the adherence of the European Union. In 1999, the Commission recommend the beginning of
negotiation of adherence with Romania, which a ctually has begun on 15 February 2000.
Romanian’s objective was to obtain a full membership in 2007. During the summit from
Thessaloniki in 2004, it was declared that the European Union sus tained this objective.
Romania needed to annihilate the corrupti on and to implement the reform, to free the juridical
system and press and to stop the abuses of the police. 54
Romania finishes the adherence to the European Union on 17 December 2004. The
treaty of adherence was signed on 25 April 2005 in Luxembourg and as a consequence to adhere
on 1 December 2007. European Community Commission published in October 2005 a new
53 https://europa.eu/european -union/about -eu/history_en , accessed on 19.02.2017.
54 Berinde Mihai, Giurgiu Adriana, Aderarea României la Uniunea Europeană , Ed. Universității din Oradea ,
Oradea, 2007, p 50 -120.
35
country report concerning the recorded progressions of Romania on the adherence perspective.
According to the report, Romania continues to fulfill the political criterion in order to become
a member state, but also the criterion regarding the functional market economy. The report
states that a rigorous implementation of the reforms will enhance the local economy in order to
face the external pressure of competition and market forces. Romania did significant progresses
in order to align the internal legislation to the European Union’s legislation and the country will
be able to fulfill its obligation as a member state, starting with the adherence.55 Generally, the
Romanian community was for the integration, with a percentage of trustworthy of 64%.56
Starting with 1st of January 2007, Romania become a member state of the European
Union, shifting from the place of an active observer to a full membership. I t is the seventh
country from European Union as regards the number of inhabitants. Romanian language
becomes an official one in the Union, the name: “Uniune European ă” receiving an official status
in the language.
Romanian’s geopolitical position influen ces the European Union regarding the
relationships with East Europe, Middle East, Turkey and Asia. The integration influences also
the regional relationships of Romania. The country imposes a visas regime for Moldavia,
Serbia, Montenegro, Russia, Ukraine, Belarus and Turkey. Romanian Government longs not
only for the euro -atlantic mainstreaming but also for creating the stability on Black Sea.
“In January 2007, FOB exports amounted to RON 6682.6 million (€ 1965.4 million),
their value being with 2.9% higher than in the same month of 2006, calculated from values
expressed in RON, respectively 10.7% calculated based on values expressed in €. (…) In
January 2007, CIF imports amounted to RON 10293.5 million (€ 3026.9 million), their value
being higher than in the same month of previous year with 16.7% from values expressed in
RON, respectively 25.4% from values expressed in euro.”57
As presented in the “Romania’s Integration in the European Union. Opportunities and
Challenges”, the integration in the Europe an Union has a high impact on the Romanian industry.
Starting with February 2007, there was registered an increase of 5.6% in the industrial
55 Ministerul Integrării Europene: „ Coordonarea activității ”, available on
http://www.mie.ro/fisiere_atasate/ro18_1138877059Observator_activ_site.pdf , accessed on 23.03.2017.
56 Eurobarometrer 64.2 – Public Opinion in European Union , autumn 2005, available on
http://ec.europa.eu/public_opinion/archives/eb/eb64/eb64_ro_exec.pdf , accessed on 27.03.2017.
57 Voineagu Virgil, “Romania’s Integration in the European Union. Opportunities and Challenges – Economic
and Social Evolution of Romania during 1.I -28.II.2017 Period ”, available on
http://www.asociatiaeconomistilor.ro/documente/simpozion_AGER_2007_engleza.pdf , accessed on 27.03.2017.
36
production and 7.5% in manufacturing production , compared to the previous year . The level of
production of thermal and electric energy and mining decreased 1.3% because of the increase
of imports for this category of products. In equipment and machinery there was a high increase
of 31.8% and as regards non -metallic minerals and construction materials, the increase was
about 20.8%. An impressive growth was registered in the construction works; in February 2007,
it has increased with 28.6%, compared to the previous year. Tourism is another economic sector
that has taken benefits over the European Integration. The number a rrivals in Romania with
tourism scope were by 8.5% higher in February 2007, than 2006. Starting with the integration,
the unemployment has decreased, hence in February 2007, the number of unemployed persons
decreased with 95.6 thousands persons, compared t o February 2006.
Although there were registered also decreases. The highest deceases characterize the
following branches: TV, radio and communication equipment with a percentage of 47.7%.
Furthermore, the turnover of the retail trade has decreased after t he integration with 2.2%. The
explanation re gards especially the e-commerce, which was chosen by the Romanian population
with little free time and high incomes. 58
Through the advantages of the Romanian integration we could identify the enhancement
of expo rt because of the imports of raw materials that are not available in the home country and
which are the base for the export production. Also this raw materials could be used for internal
production or could be complementary. The last, but not the least, Ro mania can import the
necessary equipment in order to develop the capacity of production.
Starting with the integration, our country has changes its status of developing country,
but many foreign direct investments, which sustains the exports, were expect ed to be made in
Romania.
Our country has succeed in foundation of some branches with competitive advantage
during the post -adherence period. The most important is low wage and qualified workers (e.g.
footwear industry). The condition for a good result in European Union context is to increase
the level of investment in know -how and technologies, in order to be up to date with the last
innovations, in order to face the competition. 59
58 Voineagu Virgil, “Romania’s Integration in the European Union. Opportunities and Challenges – Economic
and Social Evolution of Romania during 1.I -28.II.2017 Period ”, available on
http://www.asociatiaeconomistilor.ro/documente/simpozion_AGER_2007_engleza.pdf , accessed on 27.03.2017.
59 Giurgiu Adr iana, Comertul Intraeuropean – O noua perspectiva asupra comertului exterios al Romaniei, Ed.
Economica, Bucuresti, 2008. p. 350 -355.
37
The combination between the partial potential unutilized in the agricultu re and the lack
of industrial restructuration will offer the necessary opportunity in order to increase the degree
of efficiency of our foreign trade in the European integration context. For this there is a must
not only the agricultural restructuration, w hich could be made with European Funds, but also
the removal of political and institutional barriers. Therefore, this development depends on the
capacity of the local entrepreneurs to extract the opportunities offered by this new status of
Romania and to t ransform the apparent disadvantage in real advantage. 60
In 2015, the total amo unt of the expanding made by European Union in Romania
cumulate 6 538 milliards EUR and Romanian’s contributions to the European Union counts for
1 319 milliards EUR . The main direction for the European finance in Romania is investment,
because it generates an added value. European Funds do not finance the social protection or
national defence. The priorities are the projects that take in account the reduction of the
economic, social and territorial discrepancies between European regions. Regional Funds
invests in order to reduce the unemployment, to enhance the competitiveness, the economic
growth and the quality of life, taking into account the sustainability of the developmen t. The
second domain for the European Funds focus on the agriculture and rural development. This
policy sustain the agriculturists, promoting healthy and high quality food products, at the same
time protecting the environment and stimulating the rural econ omies. Between 2007 and 2012
the agricultural income per worker has increased with 51%.61
60 Idem
61 http://europa.eu/e uropean -union/about -eu/countries/member -countries/romania_ro , accessed on 17.04.2017.
38
PART II: ST UDY CASE: THE IMPACT OF ROMANIA ’S
MEMBERSHIP ON EUROPEAN UNION OVER ROMANIAN
AGRIFOOD INDUSTRY
I. Introduction
With a surface of 238 391 km2, out of which 61.3% is arable land and 28.3% forests,
Romania is a country that contains five bio -geographic regions: steppe, pontic, pannonian,
mainland and alpine. 87.1% of the Romanian surface represents rural area.62 Taking into
consideration also the climacteric conditions and the fertility of the ground, I can confirm that
Romania is a country with high agricultural potential.
I have chosen this subject for the study case because Romania was well known during
communism for its agricultural results. E ven if the figures were or not real, what is sure is that
Romania has proper natural cond itions for a developed agricultural industry. The elements that
lack to Romanian agriculture are the technology, equipment and infrastructure. Starting with
the integr ation in European Union, this deficiency could be settled, with the help of th e funds.
European Union is aware of the potential of the Romanian agriculture, so, through the most
funded industries, was the agri -food one.
In this second part of the thesis , in second chapter, is presented an overview on
Romanian food sector, in relationships with the European Union. It is important to begin with
a brief image on this industry, in order to understand in logical line the possibilities and
weaknesses. After th at, there are presented how does the European funds help the food sector
and how does this influence the development of the industry. Starting with the integration in
the European Union, the free movement of people and goods was allowed, so the inflow of
foreign direct investments have increased. It means that this subject is also relevant for
explaining as accurate as possible the actual situation.
Starting with the third chapter the analysis become more technical, ex pressed with
charts and tables. It is imperative to have a data base for standing out the tendencies of the
Romanian agri -food industry , influenced by the Common Agricultural Policy . Also a brief
comparison between the statistical figures before the integration, after the integration and
62 http://www.madr.ro/docs/dezvoltare -rurala/programare -2014 -2020/PNDR -2014 -2020 -versiunea -aprobata -26-
mai-2015.pdf , accessed on 26.05.2017.
39
nowa days position is compulsory. The results will conduct the thesis to a final conclusion and
associated discussions.
Agriculture could be defined as a complex activity because of the interconnection
between it and other activity sectors. It could be also in the middle of all the rest branches.
Agriculture is the core of rural areas, so in order to develop the rural areas, there should be
enhanced the agriculture. The availability and continuity of food for the population are major
issues a t a microeconomic and macroeconomic level. Even if, Romania presents significant
agricultural resources, it is one of the most assailable countries from Europe regarding food
security. 63
When talking about agriculture in Romania, it is a must to talk abou t grain. Grain market
is an important one for Romania. Its accession took place substantially starting with the
European Union integration, in 2014, cereals representing “more than 65% of the cultivated
area of the country.”64 The problems with the grain ar e multiple. First is that the products
present a considerable degree of perishability. Regarding competition, it increase both at local
and international level. Through the other difficulties in grain market, should be listed the
followings: “ high degree o f self -consumption in the individual farmers; territorial dispersion of
supply, with large regional differences and seasonal fluctuations; the imbalance of domestic
supply -demand that facilitates recourse to imports or increased exports; existence of a pri ce
system directly affected by international prices; obtaining products uncompetitive in
international markets in terms of quality; organizational and functional deficiencies in taking
domestic production market ”. 65
Hence, Romania has an agri -food sector with high potential, but it is still not fully
exploited . As presented in the last chapter of the theoretical part of this thesis, Romanian export
of agri -food products explodes in 2008 -2015 interval as a result of Romanian integration in the
European Unio n. According to WTO database, in 2015, Romania exported agricultural
products valuing 7694.42 million US Dollars and representing 12.7% of the economy’s total
exports. 66
63 Manescu Camelia, Cristina Ada -Flavia, Murg Oana, Gavruta Adrian, Mateoc Teodor, Toth Attila, Mateoc –
Sirb Nicoleta, Analysis of the importance of agricultu re sector in Romanian Econom Vol 16, Issue 1, 2016,
available on http://managementjournal.usamv.ro/pdf/vol.16_1/Art42.pdf , accessed on 18.05.2017.
64 Zanvetor Raffaella, The importance of agri -food sector in Romania Economy, SEA – Practical Application of
Science, Vol II, issue 3 (5)/2014, available on http://sea.bxb.ro/Article/SEA_5_98.pdf , accessed on 18.05.2017.
65 Idem
66 http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Language=E&Country=RO , accessed on
06.05.2017.
40
Local food industry is dominated by a number of 50 big companies, which represents
less than 1% of a total of 8 400 firms activating in this field. Although these 50 companies
realize more than 40% of the Romanian food sector. The food sector account for 27% of the
total value of agricultural production. The last one provide over 180 000 jobs, which means
11.6% of the jobs from Romanian industry. Nowadays, Romanian food sector is growing fast,
being stimulated by the frequent changes in the consumer’s behavior. Romania is attractive for
the multinational companies because of the number of consumers and the availability of
resources. Romanian food and beverage market is the seventh place in European Union, taking
into consideration the size. It is also the second market from East Europe, after Poland. 67
67 Nitulescu Gabi, Radiografie industriei alimentare rom ânești , published on April 16 2016, available on
http://www.roaliment.ro/editia -1/radiografia -industriei -alimentare -romanesti/ , accessed on 06.05.2016.
41
II. Romanian Food Sector In The European Union Context
2.1. An Overview On Romanian Food Sector
In Romania, competitiveness and investments are elements that need improvement in
order to achieve the desirable economic growth. Agriculture’s contribution to Romanian’s GDP
is high, as it always has been. Although it is considered low, relatively to the resources
available. Over half of the Romanian population lives in rural areas. 68
Even if Romania food sector is characterized by an evolution starting with the
integration in European Un ion, the background of the growth was external deficit and short –
term debts. The financial and economic crisis, contracts the Romanian economic situation. The
investments were reduced and the unemployment has increased.
Romania, for Central and Eastern E urope represents an important agricultural resource.
Even if several parts of the agricultural lands are considered disadvantaged ones, there are
enough proper conditions for agriculture in South and West. “Most of the utilized agricultural
area is arable (8.3 million ha), followed by pastures and hay fields (4.5 million ha), pe rmanent
crops (0.3 million ha) and family gardens (0.2 million ) (Source: GAC 2010).”69 Unlike the other
European countries, agriculture is still a relevant sector for the Romanian ag riculture because
of the high percentage in the GDP and because of the high level of employment.
The percentage of the labor force from agricultural sector in Romania, overcome the
European average. This could be translated in low education level, elder a nd vulnerable
population. Because of this, the capacity to attract investments is very low and the level of
poverty in this areas is high. In 2012, only 2.5% of the total farmers has training in agriculture,
which is very low, compared to European Countrie s. In my opinion, this percentage will
increase due to high level of the earnings for well -developed farms.
Presenting the Romanian’s agricultural potential it would be logic to generate a higher
productivity than other European Union member countries bu t it is not like this. Romania is
under the European Union member countries in terms of agricultural productivity. This could
explained by the farms’ internal structure. They are small, using inadequate factor of
68 Zanvetor Raffa ella, The importance of agri -food sector in Romania Economy, SEA – Practical Application of
Science, Vol II, issue 3 (5)/2014, available on http://sea.bxb.ro/Article/SEA_5_98.pdf , accessed on 25.05.2017 .
69 Idem
42
productions (including human resource) and are characterized by poor development of the
infrastructure. Labor productivity shows the slowest growth from Europe and the technical
equipment is very poor.
Romania is known as an old producer of oil seeds and grains. The cereal crops fill the
most agr icultural areas. After the integration, Romanian’s agriculture faces changes and
increase in agricultural production. The most important sectors of the agriculture industry are:
horticultural and vegetable products, cereals, fodder, pig meat and milk.
Vegetable sector
The vegetable sector represents a relevant sector for Romanian agricultural industry.
Areas cultivated with vegetable represents approximately 3.25% of the cultivated arable land.
The figures are similar to the European Union ones. In order to develop this sector there is a
need for modernized greenhouses and solariums.
Fruits tree sector
This sector is characterized in the last years by decline. It has affected the rural
development, the quality of life and the increase of exports. Durin g 2002 -2012 there were cut
approximately 65000 ha of orchards. The largest deforestations occurred in apple, cherry, pear,
peach and apricot species.
Wine sector
In European Union context, Romania is on the 5th place regarding vineyard and the 6th
place regarding grapes and wine. This sector registered decreases starting with 2007.
Storage sector
According to MARD, in 2011 the capacity of storage for oilseed crops and cereals was
about 16.2 tones. For vegetable, potatoes and fruits the storage ca pacity is insufficient. The
number is 233 thousand tones. 70
The livestock sector
For rural inhabitants from Romania, cattle represents an ordinary activity, especially in
the mountain rural areas. This represents a high potential for domestic demands and for exports.
70 http://www.madr.ro/comunicare/597 -comunicat -de-presa.html?highlight=WyJkZXBveml0YXJlIl0 =, accessed
on 25.05.2017.
43
However, the beef and milk production decreased sharply in 2005 -2012 period. There are
traditionally grown not only cattle but also ships and pigs. All this categories registered
declining starting with the Romanian’s integration in European Union. A factor could be the
high inflow of external, more promoted products, available on every retail shop. Regarding egg
production, 95% of the total internal demand is provided from domestic production.
Beekeeping succeeds in covering all the national honey consumption.
Traditional products
This represents an important sector for Romania in terms of opportunities to growth,
especially in rural areas. This sector presents an expansion, mainly in milk sectors, meat
products and milling and beverage production sectors.
Organic farming
Organic farming is also a relevant sector for Romania, registering high growth. In this
sector exists support schemes in order to enhance the expansion. The demand for this products
is increasing more and more, nowadays representing an important factor in purchas ing decision .
Compared to European Countries, the number is low, but it could increase, with appropriate
promotion and information. 71
2.2. European Union Funds For Investments In Romanian Agrifood Sector
European Union funds are assigned in order to enha nce the countries’ economies.
Focusing on Romanian agri -food sector, the financial aids were earmarked not only after the
integration, but also during the pre -accession period (2000 -2006). Hence, the financial aids
distributed before the Romania’s integrat ion counted for 379.51 million Euro. This “was
granted through measure 1.1 “Improvement of processing and marketing of agricultural and
fishery p roducts” of the SAPARD (Special Accesssion Programme for Agriculture and Rural
Development) Programme for the setting up and modernization of processing and marketing
units for agricultural and fishery products.”72 These investments ’ scope is to help the country
to fulfill the requirements needed by the integration date.
71 Zanvetor Raffaella, The importance of agri -food sector in Romania Economy, SEA – Practical Application of
Science, Vol II, issue 3 (5)/2014, available on http://sea.bxb.ro/Article/SEA_5_98.pdf , accessed on 25.05.2017.
72 Department for Agriculture, Nature and Food Quality Embassy of the Kingdom of the Netherlands, THE
ROMANIAN FOOD SECTOR and the Use of EU Funds for Investments, available on http://edepot.wur.nl/6091 ,
accessed on 26.05.2017.
44
The result of this measure is the creation of 2 232 new jobs, out of which, 1 243 in meat
processing sector and 515 in milk processing sector. The main sectors for this 202 investments
are the followings: meat and eggs sector, milk and dairy products sector, cereal sector, wine
sector, ve getable, fruit and potatoes sector and oilseeds sector.
The development of the Romanian agricultural sector continues after the integration.
The name of the program is “The National Rural Development Programme” (NRDP). This
program is structured for the 2007 -2013 period and presents several areas in which this money
can be used. Through the program, Romania benefits of 8 billion Euro form the European
Agricultural Fund for Rural Development. Along with this program, Measure 123 “Adding
value to agricultur al and forestry products” was elaborated for food processing investments.
The Measure 123 has as objective the enhancement of agricultural and forestry products
through improvements in the processes and marketing of the products. The main beneficiaries
for this measure are the micro, the small and the medium enterprises. The sectors considered
are the followings: milk, meat and eggs products, cereals, vegetable, fruits and potatoes,
oilseeds, honey and wine. 73
The State Aid Scheme XS 13/123A/2008, “Stim ulation of SMEs processing agricultural
products obtaining food products other than those listed in Annex I of the EC Treaty as well as
those processing agricultural products for renewable energy and biofuels”74 is similar to
measure 123 described above, bu t includes products as: “sugar products; cocoa paste, butter,
oil or powder; chocolate; malt extracts; food products made of flour, including: pasta, breakfast
cereals, bread, pastry, biscuits; soups and soup preparations; baby food, functional and diet
food; ice cream”.75
“The National Rural Development Programme” for 2014 -2020 period activates on three
pillars: the competition and local develo pment, people and society and re sources . The financial
allocation will count for 9 363 billion Euro, out of which 8 015 billion comes from European
Union and 1 347 billion from national contribution.76 The objectives are the restructuration and
the enhancement of the agriculture, the sustainable administration of the natural resources and
73 Idem
74https://portal.afir.info/informatii_generale_pndr_pndr_2007_2013_schema_de_ajutor_d e_stat_masura_123_sc
hema_de_ajutor_de_stat_xs_13_2008 , accessed on 26.05.2017
75 Department for Agriculture, Nature and Food Quality Embassy of the Kingdom of the Netherlands, THE
ROMANIAN FOOD SECTOR and the Use of EU Funds for Investments, available on http://edepot.wur.nl/6091 ,
accessed on 26.05.2017.
76 http://www.fonduri -ue.ro/pndr -2014 , accessed on 26.05.2017.
45
the control of the changing cl imate and the diversification of the economic activities, the
creation of new jobs and the development of the infrastructure for the increasing of the rural
life quality.
Hence, there will be financed the modernization of the farms, the investments in
processing, commercializing, energy efficiency, marketing, storage, trainings and guidance.
The reforestation of some areas is another priority. The farmers will have compensator earnings
for agricultural commitment, for practicing eco methods and for contin uing the agricultural
activity in areas with natural restrains. The investments for developing non -agricultural
businesses in rural areas and the development of the infrastructure in these zones will be
financed too. 77
2.3. Foreign Direct I nvestments In Romanian Agrifood Sector
Foreign Direct Investments are compulsory for every national economy in order to
develop properly. Foreign Direct Investments are defined as an investment made by a resident,
out of the home country in order to become a resident in other economy than the direct investor
one. They are seen important for the economic growth, the main advantage being their
characteristic of development without external debt. Their efficiency is relative to their quality,
quantity and the area where the y are attracted. Foreign Direct Investments transfer in the
national economies new technologies, enhancing the modernization of the countries and
reducing the competitive differences between the developed countries and the new integrated
country in the Eur opean Union. 78
Attracting Foreign Direct Investments represent a key problem for transition economies.
After the political regime change in Romania, in 1989, the FDIs accelerated the rhythm of the
development of Romanian national economy. "The Romanian FD I stock was of approximately
60 billion euros in 2014, much beneath the level of Poland (197,5 billion dollars), of Czech
Republic (125,2 billion dollars) or of Hungary (84,4 billion dollars)., considerably smaller
countries if compared with Romania. In 20 14, the value of this stock represented approximately
40% of the Romanian GDP, a level close to the average European Union value (41,4%) but
77 Idem
78 Stanciu Silvius, The Foreign Direct Investm ent in the Romanian Agrifood Production, Volume IV, Issue
2(11)/2016, available on http://seaopenresearch.eu/Journals/articles/SPAS_11_17.pdf , accessed on 26.05.2017.
46
inferior to smaller state members such as Bulgaria (89,1%), or Hungary (60,4%) (National
Institute of Statistics, 2 015)”79
The FDIs fluxes registered a sharp increase in 2005 -2006 period with 74,78 %. This
boom was the result of privatizations in industrial and banking areas and continues, reaching
the peak in 2008. Because of the economic crisis, in 2009 -2011 period, there was registered a
significant decrease.
FDIs in the Agriculture, Forestry an d Fishery fields registered a double increase,
compared to 2008 -2009 period, representing 1 -2,5% from the total FDI in Romania. Foreign
capital from primary agricultural production accounts for 20 -40% of the total agrifood
production. The funds attracted have increased two times in 2007 -2014 interval. The majority
of primary products are exported. I n 2012, out of 100 exporters, 96 were foreign capital firms,
the trends continuing the following years.
In 2015, “from the top of 500 exporters who registered incomes of more than 40 billion
euros (75% if the total FOB), 90% of the companies were multinational with foreign capital.
Cereals (3,7%) and Tobacco (1,7%) represented the main agricultural raw materials exported
(…) in the context of a decrease registe red by the agricultural, forestry and fishery field in the
last three years.” 80
The last years are characterized by a decrease of trade surplus because of the falling
quoted prices of Romanian agrifood products in international food market, this leading t o the
decreasing of the external trade surplus. Although Romania is still seen as a relevant exporter
of end products and raw materials.
The Foreign Direct Investments are made especially in cereal storage and trade,
zootechnic production, agricultural l ands, fish farms and forests. The investors are attracted by
Romanian lands because of their high quality and low prices. Romania market is open to
investors because of the need to develop, in order to face the European Union competition. Like
other countr ies, as Hungary, Serbia , Ukraine and Bulgaria, Romania, defined as a modest
economic development was strongly affected by the foreign acquisitions and concessions of
79 Stanciu Silv ius, The Foreign Direct Investment in the Romanian Agrifood Production, Volume IV, Issue
2(11)/2016, available on http://seaopenresearch.eu/Journals/articles/SPAS_11_17.pdf , accesse d on 26.05.2017.
80 Idem
47
agricultural areas. This phenomena is spread all over the Europe and now, 50% of the total
arable lands from Europe owns to 3% of the landowners. 81
On one hand, as I have explained above, this investments have a positive impact on the
national economy, developing and modernizing this industry, but, on the other hand, this high
level of FDI con duct to rural exodus and negative effects in terms of country natural resources
and trade market. 82
Another purpose for being interested in acquiring Romanian lands is speculative and
are doing so companies from Europe, China and Middle East. Statistics s hows that 10% of the
Romanian agricultural domain is own by investors out of the Europe and 20 -30% is controlled
by European companies. The mo st FDIs made in Romania are from Italy, Denmark, Germany,
Austria and Lebanon. “The analysis (…) shows that from t he more than 650 000 ha of the
subsidized agricultural land, over 200 000 ha belong to foreign investors. The hierarchy is
dominated by Lebanese investors, with almost 9% of the total, followed by companies from
Italy, Denmark and Germany.” 83
The statisti cs regarding the FDIs from Romania and unsystematic and brief, with
discrepancies in data from different sources. This area of research should be improved because
of the high importance of the FDI for the national economy. The tendency of the FDIs in
Roman ia are unpredictable because of the often increases and decreases registered. Even if the
foreign investments are seen as a motor for the economy, in this case, is presented a deficit of
the external trade balance. On long term there should be a centralize d unitary coordination in
order to increase the quality and promote the national brands for an increase of the exports of
end products. Also, there should be avoided the speculative investments in order to reinvest the
profit in national economy for nation al growth and sustainable development.84
81 Stanciu Silvius, The Foreign Direct Investment in the Romanian Agrifood Production, Volume IV, Issue
2(11)/2016, available on http://seaopenresearch.eu/Journals/articles/SPAS_11_17.pdf , accessed on 29.05.2017.
82 Donosa Dan, Foreign Direct Investments In Romanian Agrifood Sector, Ed. Arhipeleag XXI Press, Targu
Mures, 2016, p 256 -260, available on http://www.upm.ro/cci/CCI -04/Soc/Soc%2004%2028.pdf , accessed on
29.05.2017.
83 Stanciu Silvius, The Foreign Direct Investment in the Romanian Agrifood Production, Volume IV, Issue
2(11)/2016, available on http://seaopenresearch.eu/Journals/articles/SPAS_11_17.pdf , accessed on 29.05.2017.
84 Stanciu Silvius, The Foreign Direct Investment in the Romanian Agrifood Production, Volume IV, Issue
2(11)/2016, available on http://seaopenresearch.eu/Journals/articles/SPAS_11_17.pdf , accessed on 29.05.2017.
48
III. Scenario Analysis
This scenario is composed by two main parts. First part analyses the Romanian
agricultural sector’s results under European Union influence, compared to the country’s results
if Romania hadn’t joint to European Union and had continued with the same, own agricultural
policy. The Romanian agricultural results are changed according to AGMEMOD model. The
period taking into consideration for comparison is 2001 – 2010. 2001 is a relevant year f or
Romania. In 2000 has started the negotiation between Romania and European Union and
starting with 2001 the influences of European Union’s “accession desire” start to be seen. In
2010 have been registered 3 years after Romanian accession, so it is releva nt in order to observe
the agricultural results’ tendencies.
The second part analyze the real market selling prices between 2007 and 2016. I have
chosen this period in order to present a brief image on the Romanian agricultural industry under
the influen ces of European Union integration. The data will be extracted even for 2010 and
2011 years in order to express the effect of the world crisis on the crop products’ prices. The
analysis will focus on the Romanian selling prices for crop products on the Euro pean market
with the emphasis on tendencies that have occurred starting with European Union membership.
As I have presented in the theoretical part, the accession on European Union has an
important influence on the countries’ policies. Regarding agricultural sector, the measures that
had to be taken was through the most complex. In the paperwork: “The Access ion of Romania
to the European Union – Scenario Analysis for Key Agricultural Crop Markets Using
AGMEMOD Model”, written by Camelia Gavrilescu, Dinu Gavrilescu and Cristian
Kovorchian 85 presents the methodology and the scenario analysis for some key agricult ural
products from Romania, using a part of AGMEMOD model, providing results until 2010. I will
extend the analysis until 2015.
AGMEMOD is an economic model, developed for agricultural sector. “The
AGMEMOD model is an econometric, dynamic, multi -product partial equilibrium model in
which a bottom -up approach is used. (…) The incorporation of Common Agricultural Policy
85 Gavrilescu Camelia, Gavrilescu Dinu, Kevorchian Cristian, The Accession of Romania to the European
Union – Scenario Analysis for Key Agricultural Crop Markets Using AGMEMOD Model – August 12 -18, 2006,
available on
https://www.researchgate.net/publication/23511853_The_Accession_of_Romania_to_the_European_Union_A_
Scenario_Analysis_for_Key_Agricultural_Crop_Markets_Using_AGMEMOD_Model , accessed on 01.06.2017 .
49
(CAP) instruments in a harmonized fashion in each of the country models al lows the
AGMEMOD model to analyz e (…) the impact of possible pol icy changes, at the Member States
and aggregate EU levels, in an internally consistent and transparent fashion.” 86
The commodities selected are: barley, maize, soft wheat and sunflower. For the baseline
of the scenarios, the authors of the paperwork menti oned above, used indicators as GDP,
exchange rates, inflation rate, population, etic. The variables for each market were determined
by the supply and identity.
For determining the Non -Accession scenario, the baseline for the analysis was the
consideratio n that the policies that were applied in 2001 had continued until 2010, under the
same budgetary constraints.
Defining the post -European Union accession indicator was difficult because of the
inconsistency of policies from one year to others.
For compu ting the production price, there have been added the subsidies received, in
order to reflect the changes and the quantities of support offered for the agriculture. The higher
is the subsidy, the lower is the difference between the production price and sell ing price
presented in analysis.
The characterization of the policies proposed starting from 2007 should take into
consideration the following elements that are relevant for Romanian farmers: the selling prices
will increase because of the increasing far mers’ incomes, direct payments counting for 30%,
emphasizes on rural development programs, decreasing the direct payments for several
categories. For the consistency of the analysis, the rural development funds have been excluded
from the calculations.
86 Chantreuil Frédéric, Le Barbenchon Le Barbenchon, AGMEMOD 2020 Project Final Reports: Final Activity
Report Part I , available on http://cordis.europa.eu/documents/documentlibrary/121790321EN6.pdf , accessed on
01.06.2017.
50
Chart 1: Produ ction price and sell ing price of soft wheat for no accession scenario
compared to EU membership scenario
Source: Created by the author, based on the statistical data available on
https://www.researchgate.net/publication/23511853_The_Accession_of_Roma nia_to_the_European_Union_A_
Scenario_Analysis_for_Key_Agricultural_Crop_Markets_Using_AGMEMOD_Model , accessed on 09.06.2017 .
According to Char t 1, representing the production and selling prices of soft wheat for
no accession scenario in comparison with Eu ropean Union accession scenario, we can observe
that production prices have a tendency to increase for no accession scenario and for European
Union membership scenario, the chart shows a slight decrease in 2010, compared to 2007.
Starting with 2001 there i s a significant increase of the production prices as a result of the
financial support applied for this category of agricultural product. In 2010, the selling price of
10, 93 Euro/ 100 kg which is under the production price of 10, 99 Euro/ 100kg, suggest t hat the
financial support rich the maximum level in the period chosen for analysis. For no accession 10.6011.60
10.9110.9911.0010.99 10.99
10.93
10.6010.6510.7010.7510.8010.8510.9010.9511.0011.0511.1011.1511.2011.2511.3011.3511.4011.4511.5011.5511.60
Production price Selling priceEuro/100kg
Soft wheat2001 no accession
2007 no accession
2007 EU membership
2010 no accession
2010 EU membership
51
scenario the selling prices are staying the same, while the production prices are increasing. As
a result of the European Union membership, the selling pri ces decrease, being more competitive
on European Common Market. The selling price reach its lowest value of 10, 93 Euro/100 kg
in 2010 under European Union membership scenario.
Chart 2: Production price and selling price of ba rley for no accession scenario compare d
to EU membership scenario
Source: Created by the author, based on the statistical data available on
https://www.researchgate.net/publication/23511853_The_Accession_of_Romania_to_the_European_Union_A_
Scenario_Analysis_for_Key_Agricultural_Crop_Markets_Using_AGMEMOD_Model , accessed on 09.06. 2017 .
According to Chart 2, representing the production and selling prices of barley for no
accession scenario in comparison with European Union accession scenario, we can observe that
both the production and selling prices are increasing under no accessi on scenario, while, after
the 2007 accession, the production price and selling pri ce are equalizing and decreasing with 7.159.69
8.2210.99
10.0210.93 10.93 10.93
7.007.107.207.307.407.507.607.707.807.908.008.108.208.308.408.508.608.708.808.909.009.109.209.309.409.509.609.709.809.9010.0010.1010.2010.3010.4010.5010.6010.7010.8010.9011.0011.10
Production price Selling priceEuro/100kg
Barley2001 no accession
2007 no accession
2007 EU membership
2010 no accession
2010 EU membership
52
the same rate. This means that the level of subsidizing is very high, enhancing the Romanian
barley export. The selling price in 2010, o f Romania as a European Union country, counting
for 10.93 Euro/100kg is lower compared to selling price s from no accession scenario, exception
being 2001 year.
Chart 3: Production price and selling price of maze for no accession scenario compared
to EU membership scenario
Source: Created by the author, based on the statistical data available on
https://www.researchgate.net/publication/23511853_The_Accession_of_Roma nia_to_the_European_Union_A_
Scenario_Analysis_for_Key_Agricultural_Crop_Markets_Using_AGMEMOD_Model , accessed on 09.06.2017 .
According to Chart 3, representing the production and selling prices of meze for no
accession scenario in comparison with European Union accession scenario, we can observe that
the production prices are increasing for the no accession scenario and decreasing after the
European Union integration. The tendency is the same as for barley, the production and selling 12.94
11.9115.4016.0016.20
15.80 15.79 15.79
11.9012.0012.1012.2012.3012.4012.5012.6012.7012.8012.9013.0013.1013.2013.3013.4013.5013.6013.7013.8013.9014.0014.1014.2014.3014.4014.5014.6014.7014.8014.9015.0015.1015.2015.3015.4015.5015.6015.7015.8015.9016.0016.1016.2016.3016.4016.50
Production price Selling priceEuro/100kg
Maze2001 no accession
2007 no accession
2007 EU membership
2010 no accession
2010 EU membership
53
prices are equalizing after the integration, this showing the high degree of financial support.
Also the selling price, except 2001 year, is reaching the lowest value in 2010, under European
Union scenario: 15, 79 Euro/ 100kg.
Chart 4: Production price and selling price of sunflower for no accession scenario
compared to EU membership scenario
Source: Created by the author, based on the statistical data available on
https://www.researchgate.net/publication/23511853_The_Accession_of_Romania_to_the_European_Union_A_
Scenario_Analysis_for_Key_Agricultural_Crop_Markets_Using_ AGMEMOD_Model , accessed on 09.06.2017.
According to Chart 4, representing the production and selling prices of sunflower for no
accession scenario in comparison with European Union accession scenario, we can observe that
in the c ase of sunflower the tende ncies that were almost the same for soft wheat, barley and
maze, now are totally different. Romania is a major producer and exporter of sunflowers from
Europe. Hence, the prices tent to increase, even after integration, even more than in the case of 175.20 175.20219.00 219.00231.80 231.80278.16 278.16
175.00185.00195.00205.00215.00225.00235.00245.00255.00265.00275.00
Production price Selling priceEuro/100kg
Sunflower2001 no accession
2007 no accession
2007 EU membership
2010 no accession
2010 EU membership
54
no acc ession scenario. The difference between the production and selling prices is zero. It
means that the production of sunflower is highly financially sustained. The integration to
European Union extend the market for sunflower and this results in increasing p rices. In 2010,
selling prices for European Union integration scenario reached 278, 16 Euro/kg.
As a result of th e model analyses, there was no relevant change s of the production
prices. The scenario for non -accession presents stagnation for wheat and an insignificant
increase for maize and barley. In the case of sunflower, the results are different, there is a
significant increase of the production price even in the non -accession scenario. For accession
scenario there are shown slight decrease of the pro duction price for wheat, but for maize, barley
and especially sunflower the prices are increasing.
As long as the selling prices include the support offered, their level is increasing
compared 2001, an exception being wheat, because of the financial supp ort applied before the
accession period. The reason of the increasing prices is the new agricultural policy.
Secondly, the analysi s focus es on the real market prices for soft wheat, barley, maze
and sunflower. Now the emphasis move from the comparison be tween the no -accession and
accession scenario to the European Union integration’s influence on the selling prices for the
selected agricultural products. In Table no 5 are presented the selling prices for soft wheat,
barley, maze and sunflower in several r elevant years.
Table 5: Real annual selling prices on the market for selected crops
Crop Annual
prices on the
market 2007 2010 2011 2016
Soft wheat Selling price 18.30 14.01 20.76 14.03
Barley Selling price 20.10 10.84 21.47 17.82
Maize Selling price 23.10 20.44 23.59 16.48
Sunflower Selling price 25.20 28.25 37.27 33.63
Source: Created by the author, based on statistical data available on
http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do , accessed on 10.06.2017.
According to Table no 5, starting with 2007 the selling price for soft wheat , barley and
maize has decrease d until 2010. The decrease is explained by the European Un ion accession,
with its aids in agricultural sector. The funds helped the farmers to develop the business by
modernizing the process and technology. After modernization results high efficiency which
55
conduct to lower prices . Furthermore, more and more busin esses were set up in this field. This
also led to a selling price reduction.
In 2011 there is registered an increase in price because of the economic world crisis.
Even if the crises started in 2008, its price effects were felt in Romania just in 2011. H ence the
prices for soft wheat, barley and sunflower are almost the same, compared to 2007 year.
In 2016 is presented Romania recovered already after the economic crisis. The prices
for the soft wheat, barley and maize have decreased again, close to, bu t not lower than 2010
year. Now the degree of funds have decreased and the prices have been regulated by the market.
According to Eurostat database, the Romanian agricultural sector was subsidize only in 2008.87
Even though the selling prices in 2016 are lo wer, compared to 2007.
For sunflower the situation is different. The selling price increase in 2010, compared to
2007 and continued to increase until 2011. In 2016 the selling price has decreased, but the price
was still higher than the selling prices fr om 2007 and 2010. Romania was and still is through
the first producer of sunflower seed from Europe. Thus the accession in European Union, didn’t
lead to a decrease in price, but in an increase of the selling market and demand. As a result, the
selling pri ces for sunflower increase after the Romania’s integration, but decrease after the
world economic crisis.
Definitely, Romania is an important actor in European Union agricultural trade. In 2016,
Romania ranked the first place in European Union for the cultivated area with corn and
sunflower. Regarding maze, Romania placed the first position for cultivated area and the
second, after France, for the level of production. For cultivated area and production of wheat,
Romania ranked the fifth position.88 Hence , Romania has a comparative advantage in agrifood
sector and should take advantage and exploit it at maximum capacity.
87 http://ec.europa.eu/eurostat/data/database , accessed on 17.06.2017.
88 https://www.romania -insider.com/romania -first-eu-sunflower -crops/ , accessed on 17.06.2017.
56
CONCLUSIONS AND DISCUSSIONS
In this thesis I have analyzed nowadays world context for international trade, which is
characterized by a lot of opportunities and challenges. The globalization and development of
international trade lead to foundation of several institutions that regulate the relationships
between economic actors. Furthermore, in order to understan d international economy, and to
be able to “fix Romania on the map”, there is the need to present the international trade theories.
Romania is a European Union member country, so the foundation, the role of the common
market and the Romanian adherence on t he European Union are relevant factor s for explaining
the country’s tendencies . For the case study I have chosen the evolution Romanian agrifood
sector, highlighting the European Union accession influence on selling prices for soft wheat,
barley, maze and sunflower.
As I have presented in the first chapter, in the future period are expected several changes
at the world level . Because of the globalization , technology and the high level of
interconnections between countries, the world trade became unstable, unpredictable and
characterized by fast evolutions. Hence, more and more challenges, but also opportunities
occurred, depending on the capabilities of each country/ continent. There are expected
challenges regarding food security, water, unemployment, cli mate change and healthcare
systems because of the increase of the populations (9 billion people by 2050).
Although there are a lot of challenges that we have to overcome, I have identified also
opportunities: the enlargement of the market place due to glo balization, the outsourcing
possibility, the agreements between countries, especially regarding custom duties and the
development of the international institutions in charge with enhancing the relationships and
international trade between countries.
Start ing with 1947, there was founded GATT in order to enhance the trade between
countries. During each round it became more complex and stronger, resulting in 1st January
1995 the foundation of WTO, replacing the GATT. Furthermore, UNCTAD, OECT, but also
UN an d IMF are global institutions that sustains the cooperation between countries. The
countries started to develop trade agreements, reducing the custom duties or even eliminating
the duties.
57
International theories should be seen as model, as a framework for international trade.
They present a background, from different points of view, for understanding how does the
international trade work. In practice, the things are different, but the theories could generally
explain the global tendencies. Depending on eac h country’s specificities, the entities could
choose which theory is more suitable for them, to follow it or to combine theories in order to
result the most suitable and realistic image of the national market in international context. In
my opinion, the mo st relevant theory is the comparative advantage theory, because it refers to
the endowments of each country, which together with specialization could result into the highest
level of efficiency and the most sustainable indus try/business, because these capa bilities are not
easily replicated.
When talking about free trade agreements, it was a must to develop European Union
common zone because is the first community that succeed to integrate. I have explained the
steps needed for realizing the European Union common market and the Romanian accession
process which reach the integration in EU in 2007. Starting with the accession process several
major changes took place at national level. For this I have chosen for the study case to compare
the result of Romanian agricultural sector for no accession scenario and integration scenario.
Moreover, I have statistically proved that the s elling prices in this sector dec reased consistently
starting with the EU integration. The reason why I have chosen this sector is the co mparative
advantage that Romania has in agricultural sector due to proper land, climate and geography
positioning.
The main result of the scenario analysis is that irrelevant changes would have occurred
in Romanian agricultural production under no accession scenario. In spite of the growth
potential and country’s proper conditions, Romania would still be an importer of barley and
wheat.
In contrast, after the accession of Romania in European Union, this sector presents a
positive evolutio n of consumption and production. There took place structural changes and
were offered financial aids for modernization and development. This conduct to an efficient
input and output markets, increasing farmers’ incomes and decreasing selling prices. An
exception for decreasing selling prices was sunflower, because of the high demand on European
Union market. Romania is the first producer and exporter in Europe of sunflower seeds.
Farmers take advantage on the economies of scale due to modernizing technolog y, being able
to produce large quantities and export the surplus.
58
First I have demonstrated that Romania has proper conditions and high potential for
agricultural production. Second I have proved that European Union integration has a positive
effect on R omanian agrifood sector, focusing the analysis on selling prices which suggested the
increasing level of production and increasing demand for the Romanian crops.
In conclusion, the international market presents challenges, but also opportunities, one
of them being the European Union common market. Romania takes advantages over this
opportunity and have enhanced its economy, especially the agricultural sector, which represents
the most relevant sector for Romanian economy.
59
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