Trade Impacts of Agricultural Support in the EU

This paper aims at providing an overview of the most relevant trade issues raised by the current agricultural domestic and trade policies of the European Union (EU) and at drawing policy implications for the future of the Common Agriculture Policy (CAP) and for international trade negotiations. The focus of the paper is the period after the 2003 CAP reform which largely decoupled EU direct payments. The paper assesses the trade impacts of the EU policies by: a) analysing the evolution of the policy instruments and of the financial resources under Pillars 1 and 2 of the CAP; b) reviewing the theoretical literature and the empirical tools and evidence on the production and trade impacts of direct payments, market management measures and rural development policies; c) analysing the evolution of the bound, applied and preferential agricultural tariffs and of the tariff rate quotas applied by the EU; d) reviewing the theoretical literature and the empirical tools and evidence on the degree of agricultural protection provided to the EU agricultural sector by the EU multilateral and preferential tariffs, tariff rate quotas and non-tariff measures; and e) discussing the policy implications with a focus on the debate about the future of the CAP.