Analytical Note, March 2011

EU’s Increasing Use Of Decoupled Domestic Supports In Agriculture: Implications For Developing Countries.

The EU has been undertaking reform in its Common Agricultural Policy. Nevertheless, subsidies to EU agricultural producers are continuing. The major change is that 93% of these supports are now provided in the form of direct aid payments to producers.

On these grounds, the EU is arguing in the WTO that its supports are no longer trade distorting, since they are not tied to farmers’ production. In some sectors such as cereals, these direct payments compensating EU farmers directly have had the effect of drastically reducing domestic prices in the EU, whilst also making these EU subsidised produce ‘competitive’ on the world market.

These distortions have far-reaching implications for developing countries, including on their small farmers. EU’s developing country partners negotiating trade agreements with it should therefore have a range of trade policy tools to protect themselves against EU-created distortions in agricultural trade.


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