Home Economics Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.
Impact assessment of the 2003 reform and 2009 Health Check on the milk market
Several studies have analysed the impacts of the recent dairy policy reforms, among which Requillart et al., 2007; Bouamra-Mechemache et al., 2008 (both relying on the EDIM model); Chantreuil et al., 2008 (using the AGMEMOD model); Witzke and Tonini, 2008 (using the CAPSIM model); Jongeneel and Tonini, 2009; and Jongeneel et al., 2010). In the following discussion, we rely mainly on results obtained in the EDIM analysis (see in particular Bouamra-Mechemache et al., 2009). This study played a key role, which is reflected for example in quota rent estimates they made, and which were often used as a starting point for the other studies. Moreover, the EDIM model, which is a spatial partial equilibrium model, has a high level of detail with respect to modelling the different policy instruments, while it also considers a large number (14) of dairy products and preserves balance constraints between dairy products.
The 2003 CAP reform included for the dairy sector 1) a 25% decrease in the intervention price for butter over four years from 2004/05 to 2007/08; 2) a 15% decrease in the intervention price for SMP over three years from 2004/05 to 2006/07; 3) gradual increases in milk quota implemented during the period 2006/07 to 2008/09 in EU15; overall, the EU27 milk quota to increase by 1.1% to reach 140 million tonnes in 2008/09, and 4) the introduction of direct payments in 2004/05. These payments are considered as fully decoupled and as such do not affect the level of production which only depends on market prices.
Figure 5.2 shows the calculated impact of the 2003 CAP reform on the evolution of raw milk prices, both within the EU25 and for its key competitor Oceania assuming “normal” conditions on world markets. It includes the impact of empirically estimated autonomous changes in the demand for dairy products both in the EU domestic market and in the rest of the world. Similarly it includes changes in the production costs (technical progress). Three phases can be distinguished:
The presented impacts presume that a new WTO agreement has been implemented, following the Falconer proposal of autumn 2007 (including removal of EU export subsidies, tariff reductions for butter, powder and cheese of 23%, 63% and 21% respectively, and doubled TRQ import quotas for butter and cheese).
Figure 5.2. Impact of recent dairy policy reforms on the price of raw milk in EU25
Index 100 = EU25 price in 2003/04
Source: Bouamra-Mechemache et al. (2009).
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