Does the CAP support cohesion objectives? An examination of the distributional impact of agricultural support
Abstract:Using a dynamic multi-product partial equilibrium model, this paper first examines the potential impact of recent policy changes accruing from the mid term review (MTR) of the Common Agricultural Policy (CAP) in 2003, on the cattle and sheep sectors in Ireland. Second, it evaluates the potential impact of the implementation of a CAP, budget neutral, common EU flat area payment across all Member States. The European Commission has signalled that it will be evaluating current differences in the level of support between Member States as, for example, in the explanatory memorandum accompanying the Commission's Health Check proposals the Commission argues that it is "increasingly harder to justify the legitimacy of significant individual differences in the support level which are only based on past support" (CEC, 2008; p.18). This paper demonstrates how there are significant differences in the level of CAP payments per hectare across Member States, as generally farmers in more prosperous Western and Nordic countries receive a much higher level of payment per hectare than farmers in relatively poorer Central and Eastern European countries. In relation to Ireland, similar to most other EU-15 countries, farmers benefit from the current inequitable distribution of payments and the results indicate that any move towards equalising the level of payments per hectare will have a significant negative impact on agricultural production and net trade.
Document Type: Regular Paper
Publication date: 2010-04-01
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