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GTAP Resource #1042

"Decoupling Support in Agriculture: Impacts of redesigning European Agricultural Support"
by Frandsen, Soren, Birgitte Gersfelt and Hans Grinsted Jensen

The objective of this paper is to discuss the concept of decoupling and to assess the impact at the individual member state level in the European Union and in non-member regions of liberalising domestic support in the EU. Three scenarios are analysed each one of them illustrating the impacts of eliminating or decoupling the European agricultural support.

It is found, that the existing domestic support payments in the EU are indeed coupled to production and hence they affect production decisions and distort international trade with adverse effects on the export potential of e.g. developing countries as a consequence. Furthermore, the value of this support is capitalised in significant higher land prices in Europe than would otherwise prevail.

The scenarios illustrate the economic implications of transforming all domestic support payments (as well as other distorting policies) into a nationally homogenous and fully decoupled payment to all agricultural land, i.e. irrespective of the farmers decision to crop or not. Specifically, the analysis suggest that it is possible to convert the existing agricultural support into a fully decoup-led payment which would not distort international trade and it indicates a way forward to offset the negative impact on land prices. Such a policy would also comply with the WTO rules (i.e. fall within the green box as decoupled income support). The analysis also suggest, that such a policy reform could be achieved at somewhat lower budgetary costs as compared with the existing costs of the Common Agricultural Policy.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
2002 Conference Paper
Status: Published
By/In: review of urban & regional development studies vol. 15, No. 2 July 2003
Date: 2003
Created: Jensen, H. (4/30/2002)
Updated: Jensen, H. (8/28/2007)
Visits: 4,227
- Agricultural policies
- European Union

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