US and EU Agricultural Policy: Divergence or Convergence?
The 2008 US Farm Bill has many similar features to the 2002 US Farm Bill where key provisions such as the target price and loan rate remain. On the other hand, the European Union is following a path of more decoupled payments, especially given the reforms in 2003 and afterward. However, many of the elements of either farm program may no longer be of significance if high commodity prices remain, many of which are above US target prices. High prices have caused many countries to lower tariff and nontariff barriers. In the context of high prices, the welfare costs of both the US and EU policies have been greatly reduced. However, especially for the European Union, there remains a large income transfer from the treasury to farmers since, under decoupling, farmers are given annual payments at least through 2013. Given the single farm payment scheme of the European Union, farmers are allowed to respond to high prices and, in addition, collect a subsidy from the treasury under the rubric of decoupling. Producers have collected double rents: from the market and the government.
KeywordsEuropean Union Common Agricultural Policy Welfare Cost Conservation Reserve Program Loan Rate
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