Agricultural trade liberalization –steps taken by the EU and how Finland will face them

The challenges in Finnish and European agricultural markets are best understood by those indications that have been expressed in international arena of WTO negotiations. Despite the stalemate of the Doha Round negotiations, the EU has clearly committed to adapting to more liberal environment in global agricultural trade. Along these lines, EU has committed to decreasing trade distorting policy instruments, export subsidies and domestic policy instruments In this paper, these two policy reforms within the European agricultural policy, are studied in global trade framework. Of the Doha agriculture package they are those elements that seem to be realizing despite the other pillars. The reform in domestic support has been analysed as the decoupling decision in CAP 2003 reform. The commitment of export subsidies is assumed to be global. Both the reforms are connected to WTO negotiations. Global trade model, GTAP is applied to numerical evaluations of the policy reforms. Results are studied especially from the viewpoint of Finland and reflected to other studies both in the area of Doha Development Round as well as CAP reform. Results show that within the EU, both the reforms decrease agricultural production and pave way for more liberal trading environment even though they do not in itself have any incentives for more imports or exports. Effects vary in their magnitude between member countries. Both the reforms decrease world trade and have a positive impact on world market prices of agricultural products. Results are in line with international studies in the field.