Reform of the European Union's Common Agricultural Policy: How to reach GATT-compatibility?

This paper studies the reform of the European Union's Common Agricultural Policy (CAP). It examines three questions: (1) do current reforms meet the targets specified in the Uruguay Round Agreement? (2) what additional reforms are needed to make CAP GATT-compatible? and (3) does CAP reform alleviate the EU's budgetary problem? To investigate these issues, we use a six-region, 13-sector computable general equilibrium model with explicitly modeled policies. We find that CAP reform worsens the EU's budgetary situation and does not meet the GATT targets. We quantify support price reductions and quota increases needed to reach the targets. (C) 1998 Elsevier Science B.V. All rights reserved.