Competitiveness of the EU dairy industry

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Competitiveness of the EU dairy industry

8 Development of the CAP and trade

policy: projections with GTAP

8.1 Introduction

The EU's Common Agricultural Policy is changing and WTO negotiations on the

DOHA round are still pending. As the cost of raw material and the quota system

have an important effect on the competitiveness of the dairy industry, this chapter

provides some future projections that are made with GTAP for the dairy sector

of the EU. The current setting of the EU CAP is the starting point of this

study. In the second scenario the consequences of quota abolition are described.

In the third scenario a full liberalisation is described.

For the setting of the scenario calculated in this study one has to distinguish

between those drivers or developments that are assumed to be exogenous.

These exogenous drivers are not directly influenced by policies in the short or

medium term. They are population growth, macro-economic growth, consumer

preferences, agri-technology, environmental conditions and world markets.

The second element of drivers describes policy-related drivers, and these will

certainly have a discernable effect within the short and medium term. They are

EU agricultural and fishery policies, enlargement decisions and implementation,

WTO and other international agreements and environmental policy.

8.2 Scenarios

We start with the current setting of the Common Agricultural Policy of the EU,

after the 2004 and 2007 enlargements with 12 new member states and the

implementation of the 2003 reform (decoupling of direct payments and the partial

reform of the sugar market organisation). As the database which is used for

this study is based on 2001 (GTAP Version 6.5) the model is updated to reflect

the actual CAP of 2007, e.g. the proposed policy changes of the Health Check

are not included in this reference scenario. This reference scenario, which provides

a projection from 2007 to 2015 is the Base scenario.

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