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

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  • Gohin, Alexandre

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.

Suggested Citation

  • Gohin, Alexandre, 2006. "Assessing the 2003 CAP Reform: Sensitivity to the Decoupling of Agenda 2000 Direct Payments," Working Papers 18868, TRADEAG - Agricultural Trade Agreements.
  • Handle: RePEc:ags:tragwp:18868
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    File URL: http://purl.umn.edu/18868
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    More about this item

    Keywords

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

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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