ABSTRACT
The literature relating to the ‘costs’ of the Common Agricultural Policy (CAP) falls into two broad categories. First there are studies which attempt to measure the costs of the existing policy against an alternative which is radically different. The second category contains studies which evaluate marginal changes in the CAP. Several adjustments are made in arriving at world prices, one of which is to assume that in the situation without the CAP the different member countries would establish different agricultural price levels, and that this, by affecting the supply-demand balance in each country, would affect world prices. If agriculture were to be supported at about the same level with and without the CAP in these countries then only small consumer losses and producer gains would be expected from a removal of CAP. The CAP financial system is compared with a nationally financed agricultural policy system in which all trade flows are valued at world prices.
