The redistributional effects of the common agricultural financial system

U. Koester

European Review of Agricultural Economics, 1977, vol. 4, issue 4, 321-345

Abstract: The decision procedure of the Common Agricultural Policy is becoming increasingly difficult. The paper examines how national interests diverge with respect to the outcome of the common decisions. Firstly, it is shown that (in the status quo) national costs of the common financial system diverge very much and that the costs are incorrectly calculated in the official statistics due to the book-keeping system. France is the outstanding gainer from product-tied income transfers between the EC-partners due to the common financial system. Secondly, collective price decisions influence individual member countries very unevenly, because they induce marginal intra-EC flows of real income. The situation of countries exporting agricultural products improves at the expense of the importing countries. Consequently, there are ‘expected external costs’ involved in the collective decisions because of institutional arrangements. This is seen as a danger for the survival of the EC. Thirdly, it is shown that the present system makes it possible to supranationalize national costs of national agricultural policy strategies. Unfortunately, the externalization is the highest for the stimulation of products with a high rate of nominal protection. Therefore, from the national point of view, the greatest relative advantage is obtained by increasing the national production of butter and skimmed milk powder.

Date: 1977
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