Agricultural Policies

Paper

The Phasing out of EU Agricultural Export Subsidies: Impacts of Two Management Schemes

Institut National de la recherche Agronomique - Unité d'Economie et Sociologie Rurales, Working Paper 03-06, Rennes Cedex, June (2003)

The present round of multilateral trade negotiations at the World Trade Organisation is likely to put an end to European export subsidies on agricultural and food products. This paper then attempts to evaluate such a policy scenario in isolation from other negotiations chapters. The main contribution of this paper is to compare two management schemes of this scenario on the European Union economy. The first one has confidence in the equilibrium role of market prices while the second one favours a supply management approach. After a theoretical analysis of advantages and drawbacks of both schemes, we conduct an empirical analysis using a computable general equilibrium model focused on the European agricultural and food sectors. Our empirical results show that the phasing out of agricultural export subsidies will have huge effects on the dairy sector and more limited impacts on arable crops and meat sectors, whatever the management scheme is. Our empirical analysis also reveals that the choice of a management scheme has a substantial bearing on sectoral welfare effects. The relevance of an European agricultural policy relying on effective supply management is finally discussed.

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