How decoupled is the Single Farm Payment and does it matter for international trade?

Abstract

The extent to which decoupled agricultural support - including the European Union Single Farm Payment (SFP) - creates production incentives remains unclear. We apply an extended version of the standard Global Trade Analysis Project model and generate a set of 21 databases that captures a comprehensive representation of domestic support. By considering and modeling a range of different assumptions regarding the SFP's degree of decoupling, we investigate the SFP's effect on the model's results. The results of our analysis reveal substantially different effects that depend on the degree of decoupling, and the findings can help validate trade analysis results, particularly for developing countries.