In June 2003, significant changes to the Common Agricultural Policy (CAP) of the European Union were decided. These changes continue the ‘reform’ process, begun in 1992, which aims to shift income support away from price support for commodities towards direct income support and payments targeted at environmental and other objectives. This paper gives an overview of the changes, with special focus on the dairy sector. It examines how the new measures might impact on the dairy sector via decreasing price support and stronger environmental regulation. Implications for dairy quota markets and international trade are also discussed.
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