Modelling the Effects of the EU Common Agricultural Policy

A recent Commission Staff Working Paper, based on collaborative research with Groupe d'Economie de Mondiale in Paris, estimates that the Common Agricultural Policy reduces GDP in the European Union, and lowers overall global welfare by about US$45 billion.The Common Agricultural Policy (CAP) of the European Union has undergone significant reform since the early 1990s, with the aim of improving its market orientation. There is an increasing focus on breaking the link between direct income payments and production decisions – so called ‘decoupling'. Expenditure on the CAP accounts for about 46 per cent of total EU budgetary expenditure, or over 50 billion a year. The majority of expenditure is in the form of direct income payments to farmers. Expenditure also includes market price support and rural development programs. These measures are bolsted by various border protection measures including import duties and other non-tariff barriers