The introduction of cross-compliance
mechanism in the European Union with its 2003 CAP-reform
might affect the costs of production and thus
competitiveness of the EU. Little evidence is available to
asses the costs of compliance with regulations and it implication
for trade. In this study a farm level competitiveness
analysis of the impacts of the Nitrate Directive
and the Identification & registration Directive focuses
on the dairy sector in Germany, France, Italy, Netherlands
and UK (within EU), and the US and New Zealand
(outside EU). The findings from this study are integrated
into a trade analysis which assesses the impact of
compliance costs on competitiveness of the various trading
nations in global trade. Representative farm studies
were used as a basis for the cost increase calculations.
Best-estimates of compliance are used from the existing
literature and expert judgements. The negative impact
of these measures (for nitrates, and animal identification
and registration) on EU imports and exports are less
than 3 percent. If a smaller increase in compliance takes
place, these already relatively small trade impacts will
be further diminished. When the standards for nitrate
pollution taken by the US and New Zealand are taken
into account along with full compliance assumption in
all countries analysed, this would only slightly improve
the EU exports. The trade impacts obtained when no
changes are assumed to happen in key competitor countries
can thus be argued as providing the upper bound of
the likely trade impacts