DOMESTIC POLICY INTERDEPENDENCE: ANALYSIS OF DAIRY POLICIES IN THE UNITED STATES AND THE EUROPEAN COMMUNITY IN THE 1980s

This paper compares domestic dairy policies In both the United States (US) and the European Community (EC) and examines the Impact of these policies on each respective dairy Industry in order to explore domestic policy Interdependence. The EC and the US have Similar goals of improving farm income and use similar price support policies to achieve these goals These policies have historically encouraged overproduction, generated surpluses and government stocks, and resulted in large government expenditures. Both have followed a mixed surplus disposal strategy with one key difference--the EC has used export subsidies to dispose of part of Its surplus on the world market. In the mid 1980s, both the US and the EC took strong action to confront these problems. The EC's marketing quota and commitment to reducing its stockpiles ultimately affected the world market as its exports fell in 1989. As a result, US stocks virtually disappeared, US prices Increased substantially and US surplus disposal programs ended By recognizing the policy linkage of EC domestic policy through the international market on US stockpiles, policymakers can choose policy Instruments more precisely