FAPRI analysis of CAP reform
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CTA. 2003. FAPRI analysis of CAP reform. Agritrade, December 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52812
An assessment of the impact of the agreed CAP-reform measures...
An assessment of the impact of the agreed CAP-reform measures on EU trade and production was published by FAPRI (the Food and Agricultural Policy Research Institute, Missouri) in September 2003, following its commissioning by a member of the US Senate. The analysis is complicated by the degree of flexibility allowed to EU members states in implementing the agreed reforms. To address this, two scenarios are explored: a 'MOST' scenario, where EU member states choose the maximum level of decoupling and a 'LEAST' scenario where they choose the minimum level of decoupling allowed. The major findings were as follows: for major commodities, the reforms would have modest impacts on supply, consumption, trade and prices; for the commodities where current payment programmes are most closely tied to production, the reforms could have larger impacts, for example reducing EU beef production by 4% by 2012 compared to what it would have been under a continuation of current policies; reforms will allow the EU to shift much of its internal support for producers from the WTO 'blue box' to the 'green box'; as a result of reform EU support in the 'blue box' will be reduced to less than 5% of the value of production, a level consistent with the recent joint EU-US negotiating proposal; projected EU 'amber support' would be less than 50% of the negotiated Uruguay ceiling. The analysis is however very sensitive to changes in the exchange rate of the euro against the US dollar, and its conclusions need to be judged in this light. In terms of WTO disciplines the paper notes that the EU's single farm payment scheme is 'structured to fit the current definition of green box income support'. The reforms agreed will bring about 'a dramatic reduction in blue box spending'. Under the LEAST scenario 'blue box spending falls to € 7 billion annually by 2007'. Under the MOST scenario 'blue box spending is reduced to € 0.4 billion annually after 2004. The paper notes that 'under both scenarios, annual amber box spending falls slightly, to about 32 billion euro. Projected levels of amber box support under both reform scenarios 'are approximately 52% below the current WTO limit'. What is more 'the projected level of blue box support even under the LEAST scenario, is below the limit of 5% of the value of production suggested in the recent EU-US joint proposal'. This implies that 'the European Union could negotiate a sizeable reduction in amber spending limits, abide by new limits on blue box spending and still maintain the policy structure just approved'. Comment: It should be borne in mind that the changes in production noted in the report are calculated not with reference to current levels of production but to the production which would arise over the period 2007-2012 were existing policies to be continued. The value of current WTO disciplines on 'amber support' is illustrated by the fact that EU 'amber box' expenditures could almost double from those that will prevail under the reform scenario, and still remain within WTO disciplines.