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Abstract

European Union (EU) consumers pay almost twice the competitive world price for many agricultural products. Agricultural subsidies accounted for almost half of the EU's total budget (US$ 40 billion on agriculture in 2000) although agriculture represented 1.7 percent of the EU's GDP and employs 4.3% of the EU's population. Domestic policies for citrus and tomatoes include export refunds, product withdraws from the market, intervention thresholds, and direct producer aid. Domestic policies for dairy include export refunds, intervention thresholds, aid for private storage, disposal aid, and milk quotas. The EU's intentions are to enhance agricultural competitiveness by setting product intervention as "a real safety net measure, allowing EU producers to respond to market signals while protecting them from extreme price fluctuations," and promoting market oriented, sustainable agriculture by finishing the transition from product support to producer support, by introducing a "decoupled system of payments per farm" which are not connected to production. The EU wishes to allow flexibility in production, but also guarantee income stability to producers. Within the last 10 years, the EU has reduced price supports and increased direct payments to tomato, dairy, and citrus farmers to compensate them for the reductions.

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