Trade and Welfare Effects of Agricultural Policies in the European Community

2a policy which achieves many of the Commission's targets, conforms to their rules of the game, and increases the welfare of all but currently importing countries.Aspecific set of proposals for implementing this policy is then outlined.This is followed by a welfare analysis of the proposed policy.: 3 This research has particular relevance given the recent fall in the value of the U. S. dollar, the agricultural productivity increases in developing countries, and the severe farm crisis in North America which is, in part, due to the fall in the value of farm exports.The proposed changes would avoid the long-run instability inherent in current policies and achieve a neutrality between Community policies and world market prices.Overview of the Performance of the Common Agricultural Policy The principles used to evaluate the performance of the policies are those specified in the Treaty of Rome in 1957, at the conference at Stresa in 1958, , and the general economic objective of "fairness."The objectives of the Treaty of Rome are contained in Appendix A. Three of the targets specified are:(1) to optimize utilization of factors of production, (2) to stabilize markets, and (3) to ensure that supplies reach consumers at reasonable prices.While we agree with the Commission's evaluation that the other targets specified in the Treaty of Rome have been met, we feel that the current policies have not achieved any of the three objectives quoted above.Optimum Utilization of Factors of Production 1.In Table 1, data on the gross fixed capital formation per unit of gross value added for agriculture and the entire economies of the EC are presented.With the exception of Belgium, in 1973 agriculture attracted a greater share of the available capital pool than did the rest of the economies.