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Assessing the 2003 CAP Reform: Sensitivity to the Decoupling of Agenda 2000 Direct Payments

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Author Info
Gohin, Alexander
Abstract

The European Union decided in June 2003 a new reform of its farm policy with a new step toward the decoupling of farm income support instruments. Available impact studies find that this reform will reduce production incentives, substantially for beef and to a lesser extent for arable crops. All these studies assume that the Agenda 2000 arable crop direct payments are already mostly decoupled while beef premiums are much more linked to production. Our main objective in this paper is to test the sensitivity of these results to this questionable modelling of Agenda 2000 direct payments which neglects eligibility rules and land market imperfections. Our analysis reveals that the negative effects of the reform on both arable crop and beef production are not sensitive to the modelling of Agenda 2000 direct payments. On the other hand, our analysis shows that, when the eligibility rules and land market imperfections are acknowledged, the decoupling effects may be much higher on the arable crop markets than on the beef markets. Policy implications of these results are finally derived.

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Paper provided by TRADEAG - Agricultural Trade Agreements in its series Working Papers with number 18868.

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Date of creation: 2006
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Handle: RePEc:ags:tragwp:18868

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Keywords: Common Agricultural Policy; Decoupling; Computable General Equilibrium; European Union.; International Relations/Trade; D57; Q17; Q18;

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  1. Jacinto F. Fabiosa & John C. Beghin & Fengxia Dong & Amani Elobeid & Frank H. Fuller & Holger Matthey & Simla Tokgoz & Eric Wailes, 2005. "Impact of the European Enlargement and Common Agricultural Policy Reforms on Agricultural Markets: Much Ado about Nothing? The," Food and Agricultural Policy Research Institute (FAPRI) Publications 05-wp382, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
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  2. Bondonio, Daniele, 2002. "Evaluating the Employment Impact of Business Incentive Programs in EU Disadvantaged Areas. A case from Northern Italy," P.O.L.I.S. department's Working Papers 27, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  3. Dewbre, Joe & Anton, Jesus & Thompson, Wyatt, 2001. " The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(5), pages 1204-14. [Downloadable!] (restricted)
  4. Gohin, Alexandre, 2005. "The specification of price and income elasticities in computable general equilibrium models: An application of latent separability," Economic Modelling, Elsevier, vol. 22(5), pages 905-925, September. [Downloadable!] (restricted)
  5. Hans van Meijl & Frank van Tongeren, 2002. "The Agenda 2000 CAP reform, world prices and GATT--WTO export constraints," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 29(4), pages 445-470, December.
  6. Ciaian, Pavel & Swinnen, Johan F.M., 2005. "Market Imperfections and Agricultural Policy Effects on Structural Change and Competitiveness in an Enlarged EU," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24463, European Association of Agricultural Economists. [Downloadable!]
  7. Paolo Sckokai & Jesús Antón, 2005. "The Degree of Decoupling of Area Payments for Arable Crops in the European Union," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(5), pages 1220-1228, November. [Downloadable!] (restricted)
  8. C. F. Bach & S. E. Frandsen & H. G. Jensen, 2000. "Agricultural and Economy-Wide Effects of European Enlargement: Modelling the Common Agricultural Policy," Journal of Agricultural Economics, Blackwell Publishing, vol. 51(2), pages 162-180. [Downloadable!] (restricted)
  9. Michael J. Roberts & Barrett Kirwan & Jeffrey Hopkins, 2003. "The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(3), pages 762-769, 08. [Downloadable!] (restricted)
  10. Alexandre Gohin & Laure Latruffe, 2006. "The Luxembourg Common Agricultural Policy Reform and the European Food Industries: What's at Stake?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(1), pages 175-194, 03. [Downloadable!] (restricted)
  11. Peterson, Everett B & Hertel, Thomas W & Preckel, Paul V, 1994. "A General Equilibrium Framework for the Food Marketing System," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 21(1), pages 37-57.
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