Agricultural and Biological Sciences
4 years ago

EU Agricultural Policy Costs Global Economy $45 Billion, Benefits Farmers.

RePEc: Research Papers in Economics
Modelling the Effects of the EU Common Agricultural Policy
Catherine Costa, Michelle Osborne, Xiaoguang Zhang, Pierre Boulanger, Patrick Jomini

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The EU Common Agricultural Policy aims to improve market orientation by reducing direct income payments tied to production decisions. Using the GTAP model, researchers found that the CAP leads to increased farm and food output in the EU, but lower GDP overall. This results in lower global welfare by US45billion,withtheEUbearingacostofUS 45 billion, with the EU bearing a cost of US45billion,withtheEUbearingacostofUS 30 billion. The CAP also affects world prices, with agriculture and food processing expanding in the EU but contracting in non-EU regions. The main contributor to this welfare loss is the border protection component of the CAP.