Challenges for Less Developed Countries: Agricultural Policies in the EU and the US

Agricultural policies adopted by developed countries are considered distortional and detrimental to less developed countries (LDCs). This paper discusses the adverse impacts on less developed countries of the agricultural support regimes of the European Union (EU) and the United States (US). Despite the fact that the budget for agriculture in these constituencies has the same order of magnitude, we find that the EU relies much more heavily on agricultural support than does the US. Specifically, the EU provides agricultural producers with an amount of support that is about two-and-a-half times that of the US, and for most commodities a larger share of farmers’ income stems from support measures as well. While the composition of producer support differs between the EU and US, the per-dollar negative impact of the policies on farmers in LDCs is about equal. Finally, we analyse the medium-term impact of the 2003 reform of common agricultural policy in the EU. We estimate the reform will lead to a reduction of EU producer support of 20 percent by 2013 and will reduce the per-dollar negative impact on LDCs of the policy as well.