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Abstract
Policy interventions in dairy markets are pervasive in industrialized countries. Resistance to
domestic agricultural policy reform in the USA and the EU is partially responsible for delays in reaching a
GA TT Uruguay Round agreement. We explain US and EU dairy policy choices by analyzing the influence
of key domestic variables. J?mpirical results for the US price support and the EU intervention price show a
dominant influence of the support (intervention) price in the previous year. US farm income, stocks, and
government costs also influenced US policy-makers' choice of the price support level. In the EU, where
multiple policy instruments are used, government costs influence both production and surplus disposal
policies. The EU chooses dairy policies sequentially - first the farm support policies and then surplus
disposal policies. The results imply that trade policy reforms will be most acceptable if farm incomes can
be maintained without increasing government support expenditures.