SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS JULY, 1987 A DIFFERENTIATED GOODS MODEL OF THE EFFECTS OF EUROPEAN POLICIES IN INTERNATIONAL POULTRY MARKETS

Abstract price that European producers pay for cereals The Common Agricultural Policy increases used in poultry rations. However, in order to European poultry production costs, prohibits compensate producers, subsidies (refunds) are imports, increases domestic prices, and sub- paid on exports of poultry meat to destina-sidizes exports. This policy has displaced some tions outside the EC. There is no direct in-U.S. exports. However, the net impact in the tervention in domestic poultry markets. Inter-U.S. has been quite modest, even assuming nal prices are supported indirectly by the ex-poultry is homogeneous, independent of port subsidies and the levy system which op-source country. Costs to U.S. producers are erates as a prohibitive barrier to imports. almost entirely offset by gains to U.S. con- The export refunds have invariably ex-sumers. Effects in the U.S. are even smaller ceeded the increase in costs imposed by the when imperfect substitutability between poul- grain policy. In the five years up to 1981, pro-try from different countries is accounted for. duction costs were on average 9 percent A retaliatory U.S. export subsidy would have higher than they would have been in the ab-more dramatic effects in U.S. markets. sence of the grain policy, while eliminating th