CAP Health Check
Although the analysis undertaken did not include the changes to the CAP arising from the Health Check agreement, it is possible to draw some conclusions as to the likely impacts of the changes to the CAP under the agreement as highlighted in Table 2.1. The move to further decoupling is likely to lead to welfare gains, although the fact that full decoupling has not been implemented in the key beef sector (as well as sheep and goats) will limit these gains. A further factor that needs to be taken into account is that some countries (France in particular) have extended the use of the former Article 69 (now Article 68) after the Health Check. Whilst our analysis highlighted that Article 69 had relative little impact in its 2003 form (other than for the durum wheat sector) any further coupling under the new Article 68 is likely to reduce the welfare gains from the Health Check reforms.
This paper has examined the impact of the compromise decision to exempt some sectors from the requirement to fully decouple payments under the 2003 reforms of the CAP. Through using conceptual and empirical analyses, it assessed whether and to what extent partial decoupling is affecting the single market and the impact it has on those countries and sectors that have embraced full decoupling.
With the help of a simulation model, the potential impacts of maintaining coupling were considered. The analysis highlighted that the nature of the impact depends upon the underlying conditions (supply and demand elasticities, etc.) and that a range of factors are important in determining the extent of the impact.
Due to the recent nature of the reforms and the way they were implemented, detailed analysis using econometric or other techniques was not really viable. Therefore, a partial equilibrium modelling framework (CAPRI) was used to simulate the situation within the European Union within the scenario of full decoupling. Use of the CAPRI model proved very useful for understanding the likely impacts in the European Union and in particular provided improved understanding of the impacts that arise because of the complex linkages within the agricultural sector both within and across countries. The results highlighted that production in coupled countries is higher than would be the case if they had decoupled, and this has subsequent impacts on other EU member states through price and trade effects. This is particularly the case in the beef sector. Though the aggregate EU production and price impacts are generally small, the production impacts on certain member states and regions are more marked. Overall welfare levels in the European Union would have been higher had full decoupling been implemented, and these gains would have been highest in the countries that remained coupled, particularly France and Spain.