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Do EU direct payments to beef producers belong in the ‘blue box’?

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  • McErlean, Seamus
  • Wu, Ziping
  • Moss, Joan E.
  • IJpelaar, Jos
  • Doherty, Andrew

Abstract

In the Uruguay Round Agreement on Agriculture, so-called ‘blue box’ support measures were exempted from reduction commitments, provided they were delivered under ‘production-limiting’ programs. Although classified as ‘blue box’, the EU system of direct payments (DP) to beef farmers imposes ‘claim-limiting’ restrictions rather than ‘production-limiting’ restrictions, allowing farmers to keep additional animals over and above the number upon which they are eligible to claim DP. The present paper provides empirical evidence that EU direct payments capitalise into the market prices of male calves and young steers in Ireland. It is also likely that DP capitalises into the prices of beef cows and heifers. Given this capitalisation process, some farmers can obtain ‘capitalised’ DP on animals produced over and above the ‘claim-limiting’ restrictions, by selling these animals through auction markets. Thus, ‘capitalised’ DP probably encourages production over and above the limiting measures.

Suggested Citation

  • McErlean, Seamus & Wu, Ziping & Moss, Joan E. & IJpelaar, Jos & Doherty, Andrew, 2003. "Do EU direct payments to beef producers belong in the ‘blue box’?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(1), pages 1-19.
  • Handle: RePEc:ags:aareaj:116173
    DOI: 10.22004/ag.econ.116173
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    1. Patton, Myles & Kostov, Philip & McErlean, Seamus & Moss, Joan, 2008. "Assessing the influence of direct payments on the rental value of agricultural land," Food Policy, Elsevier, vol. 33(5), pages 397-405, October.
    2. Ana Norman-Lόpez & Sean Pascoe & Olivier Thébaud & Ingrid Putten & James Innes & Sarah Jennings & Alistair Hobday & Bridget Green & Eva Plaganyi, 2014. "Price integration in the Australian rock lobster industry: implications for management and climate change adaptation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(1), pages 43-59, January.
    3. Cathal O'Donoghue & Thia Hennessy, 2014. "Chapter 03: The Agri-Food Sector," Chapters from Rural Economic Development in Ireland, in: Rural Economic Development in Ireland, edition 1, chapter 3, Rural Economy and Development Programme,Teagasc.
    4. Méndez Parra, Maximiliano, 2015. "Futures prices, trade and domestic supply of agricultural commodities," Economics PhD Theses 0115, Department of Economics, University of Sussex Business School.

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