The CAP Reform and E.C.-U.S. Relations: The GATT as a Cap on the CAP

Abstract

Reform of the Common Agricultural Policy has entailed the substitution of new income support instruments for the former price based instruments, mainly in the cash crop sector. Our first point is that the domestic political balance was unable to generate such a large change in policy design, in spite of inefficiencies and inbalances. The pressure of the US has been a major factor in the design of the reform. We argue that trade interests have been crucial to catalyze international collective action in order to countervail domestic pressure groups. The pursuit of an agreement in the GATT is therefore a means to place a cap on the CAP and foster some reform and control over sectors such as sugar and dairy in other countries. We do not foresee the disappearance of sources of tensions between the two countries, as EC animal products become more competitive and as the working of the CAP in the vicinity of world prices will make trade flows sensitive to world macro-economic and agricultural shocks. The Uruguay Round, should not be considered as fully satisfactory, and the long-run objective of further decoupling of payments from production incentives should be pursued.