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25.11.2009 Studies
 
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  • The Common Agricultural Policy and the French, EU and Global Economies

The Common Agricultural Policy and the French, EU and Global Economies

Patrick Jomini, Pierre Boulanger, Xiao-Guang Zhang, Catherine Costa and Michelle Osborne, Groupe d'Economie Mondiale (GEM), 2009

Content

  • Quantitative overview of CAP subsidies and tariffs
  • Estimation of their effects on output and welfare in France, the EU and worldwide

Findings

  • The CAP increases crop production, livestock production and food processing more strongly in the EU15 than in the NMS (the 12 new member states) - that is by 8.1%, 7.6% and 6.0% in the EU15 and by 2.0%, 0.6% and 5.6% in the NMS.
  • Forestry and fish production, manufacturing and services shrink because of the CAP - the effect is strongest on forestry (-1.7%) and manufacturing (-1.4%) in the EU15 and on manufacturing in the NMS (-1.1%).
  • Considering only the effects of direct payments, the fruit and vegetable sector in the EU15 shrinks by 1.2% because it receives less support than other agricultural sectors.
  • The CAP causes efficiency losses in the EU15 of € 34.3 billion and in the NMS of € 3.7 billion.
  • The welfare of North America decreases by € 2.1 billion and that of Latin America by € 4.4 billion. East Asia is the only winner from the CAP because it can import food more cheaply and export manufacturing products at higher prices (as the EU economy is distorted in favor of agricultural production at the expense of manufacturing).
  • The most severe extra-European effects are on the livestock sector in Latin America whose output is depressed by 12.7% due to the CAP.
  • Most of the distortions are caused by tariffs and not by subsidies.

Comment

  • Interesting study that shows who carries the costs of the CAP (the EU itself more than the rest of the world, and manufacturing and forestry more than services).
  • A short version is available as GEM Policy Brief with the title "Of the benefits to the EU of removing the Common Agricultural Policy", a long version has been published as Productivity Commission Staff Working Paper "Modelling the Effects of the EU Common Agricultural Policy".