A DIFFERENTIATED GOODS MODEL OF THE EFFECTS OF EUROPEAN POLICIES IN INTERNATIONAL POULTRY MARKETS

The Common Agricultural Policy increases European poultry production costs, prohibits imports, increases domestic prices, and subsidizes exports. This policy has displaced some U.S. exports. However, the net impact in the U.S. has been quite modest, even assuming poultry is homogeneous, independent of source country. Costs to U.S. producers are almost entirely offset by gains to U.S. consumers. Effects in the U.S. are even smaller when imperfect substitutability between poultry from different countries is accounted for. A retaliatory U.S. export subsidy would have more dramatic effects in U.S. markets