Impact of a Gradual Increase in Milk Quotas on the EU Dairy Sector

The European Union (EU) dairy sector is facing significant changes due to EU enlargement, the Luxembourg reform and ongoing World Trade Organisation (WTO) negotiations. This paper explores the impact of alternative dairy policies in the context of a WTO agreement and further dairy policy adjustments. In particular, it analyses the impact of gradual but significant increases in EU milk quota and discusses the implications of different changes in the allocation of milk quotas. These scenarios are compared with the status quo as decided in the Common Agricultural Policy reform of 2003. We find that, by 2014-2015, the market effects of abolishing quota are similar to those of a 2 per cent gradual quota increase starting in 2009