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The European Union has reduced its level of support to 22% of farm income, though it remains above the OECD average. In particular, the EU has reduced the forms of support that most distort production and trade, which now represent less than 30% of support to producers. The level of price distortions has been significantly reduced, as illustrated by changes in the Nominal Protection Coefficient (NPC).
The share of payments granted with no requirement to produce has increased to 47% of total support, as well as the share of payments targeted to environmentally and animal friendly practices.
- Overall, policy reforms since 1986-88 have improved the sector’s market orientation. There has been a gradual and consistent move away from previously high levels of market price support and output payments and reduction in the level of support. Production and trade distorting policies now account for 29% of support to producers as measured by OECD Producer Support Estimates (PSE).
- The implementation of recent reforms further reduced market intervention and protection, and increased the share of payments granted with no requirement to produce, thus allowing producers to better respond to market signals. Targeting is expected to increase as funds transferred from Pillar I to Pillar II under the 2009 Health Check have to be used to target specific objectives such as climate change, renewable energy, water management, biodiversity, and related innovation, as well as for restructuring the dairy sector.
- The 2009 Health Check results in about half of support to producers being delivered with no requirement to produce. However, Article 68 provides an opportunity for member states to target specific sectors and regions by implementing limited commodity-specific support.
- As a result of reforms and high world prices, export subsidies are low at 1% of EAGF expenditures. Market access for agricultural products is increasing through a number of bilateral agreements and lower applied tariffs in case of shortages.
- While substantial progress has been made in reducing the level of support and the share of production and trade distorting support, future efforts need to focus on progress towards better targeted support.
European Union: OECD Producer Support Estimates (PSE)
Level and composition by support categories, 1986-2010