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GTAP Resource #1083

"Modeling Farm Programs in the U.S. and the EU"
by Burfisher, Mary, Sherman Robinson and Karen Thierfelder

The Uruguay’s Round’s Agreement on Agriculture (URAA) categorized farm subsidies according to their impact on farm production. Traditional farm subsidies that raise commodity prices or lower input costs were agreed upon by WTO members to be highly distorting. They were placed in the "amber box" and made subject to limits and reduction commitments. "Blue box" policies such as EU compensatory payments are subsidies that are offset by limits on production, and so were exempted from reduction. "Green box" policies such as the U.S. Production Flexibility Contract payments were agreed to have minimal impacts on production and trade and so were allowed by the URAA.

Since the Uruguay Round, both the U.S. and the EU have adopted farm support programs that might have weakened links to current production decisions. At the same time, programs in both countries have become more complex, both in their implementation and in economists' interpretations of how they influence producer incentives. Because production impacts are a key characteristic in determining global policy disciplines, analysis of current programs' production impacts is particularly relevant as global negotiations on agriculture resume. In this paper on current U.S. and EU farm programs, we:

- describe farm support in 2000 for commodities and households,
- explain how current farm policies affect production decisions,
- review the debate over some policies?production impacts, particularly the "decoupling debate",
- quantify farm programs' production effects using a CGE model with detailed modeling of farm policies, including endogenous price support payments where applicable, and
- quantify the significance of alternative views on some policies' production effects.

Resource Details (Export Citation) GTAP Keywords
Category: 2002 Conference Paper
Status: Published
By/In: Presented at the 5th Annual Conference on Global Economic Analysis, Taipei, Taiwan
Date: 2002
Created: Huang, C. (5/4/2002)
Updated: Bacou, M. (8/22/2003)
Visits: 3,120
- Agricultural policies

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