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

The Intra-European Union Food Trade with the Relation to the Notifications in the Rapid Alert System for Food and Feed

“…Intra-EU food trade is strengthened by the Common Agricultural Policy (CAP), i.e., set of legislation and practices adopted by the EU to provide common, unified policy on agriculture [13]. Urban et al (2016) [17] noted that the EU is an outstanding example of heavily subsidized agriculture. Bakucs et al (2019) [22] pointed out that one of the important targets of the CAP is to facilitate the spatial integration of agricultural markets within the individual countries, as well as throughout the EU.…”

“…However, it distorts trade. Despite many years of reforms in the field of the CAP to meet the requirements of the World Trade Organization (WTO), the EU is still criticized for supporting agricultural producers [17]. According to Swinbank (2017) [23], high import tariffs under the CAP protect EU producers, but complicate EU attempts to negotiate free trade agreements around the world.…”

Determinants of African agricultural exports

“…Payments that are less related to the quantity produced (decoupled) have lesser impacts than payments directly related to production (coupled). As a result, many Organisation for Economic Co-operation and Development (OECD) countries are moving toward payments that are less tied to the quantity of domestic production (Urban, Jensen, and Brockmeier 2016). Developing countries do also provide technical, financial, and institutional support to smallholder producers to boost productivity and improve market efficiency, thereby enhancing agricultural exports.…”

Output and input bias effects of U.S. direct payments

“…Despite qualifying as a “green box” (unlimited) form of domestic support at the WTO, direct payments can distort production through five channels: risk and wealth, credit constraints, labor‐leisure decisions, farmers’ expectations, and land value capitalization (see Bhaskar and Beghin, for a review). This form of domestic support tends to be trade distorting (Chau and de Gorter, ; Goodwin and Mishra, ; Key and Roberts, ; Latruffe and Le Mouël, ; O'Toole and Hennessy, ; Urban et al., ). While interest in the impact of commodity support on input use dates as far back as in Floyd () and has continued in recent times (Yu et al., ), to our knowledge, none of the extant literature has explored whether direct payments induce input‐ and output‐biased technical change in U.S. agriculture at the national level.…”

“…These authors, for example, find that reduction in domestic support leads to welfare losses; this happens particularly in poorer countries that are net food importers, due to increases in agricultural and food prices. Among recent studies, the incomplete pass‐through of taxes and subsidies into prices is not accounted for (e.g., Urban et al., ). If domestic support payments induce input bias, as implied by the current study, then discontinuation of support payments leads to changes in input cost shares.…”