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Abstract
The vast majority of domestic support to farmers in the European Union
(EU) is notified in the World Trade Organisation (WTO) green box as decoupled payments.
The EU considers this support to minimally distort production and/or trade.
As demonstrated in the literature, this claim is questionable. This paper aims at analyzing
this claim using a global, spatially differentiated, partial equilibrium simulation
model with endogenous land supply functions. Comparing a complete elimination of
the EU green box measures with a baseline scenario, the model results indicate only
small distortionary effects in production and trade. Hence, EU support notified to the
green box seems to be compatible with the general requirements of the green box. The
finding seems to result from the assumption of unchanged EU border policies.