European Union Adopts Significant Farm Reform

In June 2003, the European Union (EU) adopted a program of agricultural policy reform, building on earlier agricultural policy reforms enacted since 1992. This program was expanded to include additional commodities in 2004, The policy changes under these recent reforms will dramatically alter the way that producers are supported and alter the incentive structure for EU farmers, but are likely to have modest impacts on EU production and consumption. EU now competes with the US as one of the world's two top agricultural exporters. The EU's success in expanding agricultural production and exports is due in part to support provided to member states' producers under the Common Agricultural Policy (CAP). The effects of CAP reform on global markets will depend on the impacts on domestic production and consumption. Overall effects on EU production and consumption from CAP reform are likely to be small.