The EU dairy sector is facing a period of significant changes that are due to three major decisions : the EU enlargement, the Luxemburg reform and on-going WTO negotiations. In this paper, we focus on the analysis of changes in both domestic and trade dairy policies using a spatial model of the dairy sector that includes EU25 member countries, the modelling of the rest of the world including the main world dairy exporter (Oceania) and 4 importing areas (Africa, America, Asia and the Rest of Europe). The paper provides detailed results with respect to dairy markets in the EU. We show that in the context of the Luxemburg reform, the WTO might have positive impacts on EU milk price. The positive impact on EU milk price of a reduction of the tariffs in the importing countries exceeds the negative one of removing export subsidies as well as lowering EU import tariffs. We explore the sensitivity of the results to alternative assumptions on demand for dairy products, EU competitiveness and price transmission in the dairy chain.


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