The impact of the EU's common agricultural policy on the structure of demad for shipping transport of grain
Faculty of Applied Economics
ETC 2010, Glasgow
University of Antwerp
Regional economic integration has become a major issue in international trade. The existing literature has failed to evaluate or quantify the implication of policy measures adopted by regional economic blocs on shipping transport services. This research quantifies the distorting effects of the European Unions Agricultural Policy (CAP) on the grain trade via the impact on shipping transport. Three different sets of econometric models are developed and estimated for each bulk carriers market sub-sector (Capesize, Panamax, Handysize), which incorporate protection subsidy component of the CAP. The results revealed that the CAP has a significant depressing effects on international grain prices and its pattern of trade, hence has consequences for the structural changes of demand for shipping transport of grain. This work also undertakes counterfactual analysis to investigate the impact of possible liberalisation of the CAP on the structure of demand for shipping transport of grain. The econometric version of the theoretical model is used to simulate a number of alternative policy scenarios in the Uruguay Round (WTO) of negotiation (EU and USA proposals). The simulation model suggests that the USA proposal will increase the North Atlantic grain trade and consequently the demand for Capesize will increase. However the EU proposal would not create a significant change to the existing situation.