An analysis of the impact of CAP reform is released
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CTA. 2003. An analysis of the impact of CAP reform is released. Agritrade, May 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52689
The European Commission released a 200-page paper reviewing its six impact...
The European Commission released a 200-page paper reviewing its six impact analysis studies in February 2003. The conclusions drawn relate to what would have been the case without the implementation of the Commission's reform proposals. It noted that the 'results should not be interpreted as changes relative to the current situation in 2003'. The Commission also noted that in DG Agriculture's analysis it was assumed that de-coupled payments would have 'no impact on production decisions of farmers'. These case studies suggested the following impacts at the product level, compared to the situation which would prevail in 2009 if no reforms were implemented: Cereals: an 8.3% average price reduction; a reduction in total cereals production, with rye and durum wheat being the most severely affected; slower growth in cereals consumption; a significant fall in EU cereal exports; a significant drop in cereals stocks. Beef: a decline in beef production of between 3% and 8%; a rise in producer prices of between 6% and 8%; a fall in domestic consumption of between 1% and 3%. Sheep: a decline in sheep production of between 3% and 6%; a rise in producer prices by between 8% and 12%; a fall in domestic consumption of 3%. In the rice sector the assessments of the impact of reform varied widely. Nevertheless a 50% reduction in the support price for rice is projected to translate into a sharp decline in EU domestic prices towards world market price levels. This, it is felt, would boost the competitiveness of EU rice, while reducing the attractiveness of the EU as an export market. While a short-term surge in rice imports is foreseen, by 2009 it is envisaged that rice imports will be a third to a tenth of the projected level without the implementation of rice-sector reform. With sharp price declines a strong increase in rice consumption is foreseen. In terms of agricultural incomes a favourable though limited impact is foreseen compared to the baseline. The February paper explains the various models used and sets out in detail the findings of each study under different scenarios. Wide variations in trends in production, consumption, exports and price levels arise from the different assumptions and techniques used in the various modelling exercises. On March 25th 2003 two new impact analyses of the Commission's proposals for further CAP reform were published. According to the Commission the studies show that the proposal to sever the link between production and subsidy (decoupling) would 'favour the extensification of production and would secure significant income gains for EU farmers'. At the sectoral level the Commission maintains that the studies show for the EU-15: a 2% fall in cereal production; a 2.7% decline in meat production; a 2% rise in milk production; an increase in farm incomes of 8.5% compared to 2001. Unlike the case with the February paper this March paper does not explicitly set out the assumptions on which the conclusions are based or explain what are the baseline assumptions which are referred to. It restricts itself to bold statements on the level of decline of EU production under the reform scenario. Comment: It should be noted that when talking of trends in production the European Commission calculates the change with reference to the hypothetical level of production which would be attained by 2009 in the absence of reform. However when looking at trends in income, the impact analysis compares the post reform situation to the current level of farm incomes. If the basis for comparison for production levels were current levels of production or predicted production levels at the outset of reform then the conclusions would be somewhat different, with EU-15 production in 2009 being projected as higher than at the beginning of the reform period. For example, in the rice sector, by comparing production in 2009 post reform with the hypothetical level of production in 2009 without the implementation of the proposed reforms, the Commission concludes that a 14% decline in EU production will occur. However the European Commission's own figures annexed to the Impact Analysis show EU rice production increasing from 1,388,000 tonnes in 2004/05 to 1,476,000 tonnes in 2009/10, an increase of over 6% rather than a decrease of 14% (this represents a 2.8% increase in production compared to the levels of milled production in 2000/01). Similar, though less pronounced trends are apparent for other cereals. It is this reality of increased EU production relative to levels at the beginning of the reform period which is important to ACP countries, since it is likely to mean increased export competition from the EU at prices lower than those currently prevailing.