General equilibrium analysis of the CAP using the GTAP model

Although partial equilibrium analysis dominates agricultural policy modelling, there are instances where a broader economy‐wide approach is more appropriate. Accordingly, this paper uses a global general equilibrium framework, provided by the GTAP model, to assess the domestic and international implications of the Common Agricultural Policy. In character with this type of model, the shuffling of global resources induced by the CAP is shown to lead to significant structural changes in the economies of all regions, particularly with respect to trade flows. Net welfare impacts, arising from efficiency and terms of trade effects, are smaller in comparison, with the European Union worse off by 0.8% and the world by 0.4%. It is argued that applied general equilibrium modelling is deserving of greater attention.