Impact of the Luxembourg agreement on milk and dairy products
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The Luxembourg agreement, finalised in June 2003, represented a major change in the Common Agricultural Policy (CAP). This agreement ushered in the “decoupling” of subsidies, making grants depend on a number of requirements, including environmental criteria. To assess the Luxembourg reform, we use the simulation tool for dairy policy reforms developed by the INRA-ESR unit in Toulouse. We show that the reform does not fundamentally challenge the dairy market balance. We also show that it is unlikely that decoupling will lead to any significant fall in European production. However the introduction of decoupling may lead to restructuring of dairy production, favouring the implementation of a more fluent system of quota transfers between producers.