Importance Of Cap Reforms For The Dutch Agricultural Sector In 2000-2020

Since 2000, the two important reforms of The EU Common Agricultural Policy (CAP) took place. The Agenda 2000 Berlin Agreement of March 1999 aimed to increase EU agriculture market orientation and focuses on the grain, oilseed, dairy and the beef sectors. It reduced intervention prices in these sectors and lowered the set-aside requirements for crops and by implementation of non-crop specific compensatory payments. The core of The Luxembourg Agreement from June 2003 was an acceleration of decoupling of farm support initiated by the Agenda 2000 complementary payment. It introduces a system of direct payments (known as single payment scheme - SPS), which are no longer linked to the production (decoupling). This CAP reform also includes commodity specific measures, especially in dairy sector. The Luxemburg Agreement links the direct payments to farmers with farm management practices which maintain environmental and other requirements set at EU and national levels (‘Cross-compliance’). The goal of this paper is twofold. First, we investigate the impact of the CAP reform on the Dutch agricultural sector in 2004 – 2007; second we examine effects of possible future CAP reform decision on the Dutch agriculture till 2020. The study is based on the AGMEMOD econometric model developed within the framework of projects financed by the European Commission. It reflects a sectoral, dynamic, partial equilibrium model, which takes into account the national specificities and is built up of models for the Member States of the EU27. The foundation for AGMEMOD is laid in the establishment of country model templates, which must achieve compatibility of the models to be built and the communality of data. The most important differences between the national models are macroeconomic assumptions, components of policies under the CAP and SAPS (in respect with the new Member States) and assumptions on the impact of direct payments on agricultural production (degree of decoupling). On the country level, commodity templates must encapsulate the modeling system to be used. Many components of these templates are based on the information and guidelines delivered by Hanrahan (2001), but then adapted to country-specific conditions. At least, they must contain issues on market and policy description, flow charts, key market and specification of the functional forms of the commodity model. The AGMEMOD model covers all important CAP commodities: grains, oilseeds, potatoes, sugar and sugar beets, livestock products, milk and dairy products. We will investigate the CAP impact on the Dutch agriculture by mean of policy simulations with the Dutch AGMEMOD model. To isolate policy effect in the historical period 2000 - 2007, counterfactual simulations for 2000 - 2007 will be run. To simulate the response of the Dutch agriculture on different policy changes in 2008 - 2020, the no-policy change baseline scenario will be developed and several policy experiments will be conducted: milk quota abolition, biofuel directive implementation and animal premiums decoupling. To indentify the policy effects the policy scenarios will be compared with the baseline.