The Economic Impact of allowing Partial Decoupling under the 2003 Common Agricultural Policy reforms on Scottish agriculture

The agreement to decouple EU direct farm payments from production and introduce the Single Payment Scheme (SPS) was formally made by the Council of Agricultural Ministers in June 2003. Due to concerns raised, the SPS provided Member States the scope to retain some coupled support and this option was taken up by some Member States but not others. Within the UK, Scotland was the only country to take advantage of Article 69 and pay a coupled payment for beef calves (under the Scottish Beef Calf Scheme). This paper, through using conceptual and empirical analyses, assesses whether and to what extent partial decoupling affected the single market and the effect that it had on the EU, member states and Scotland. The results of a modelling exercise (using the CAPRI model) highlight that production in coupled countries is higher than would be the case if they had decoupled, and this has subsequent impacts on other EU Member States through price and trade effects. This is particularly the case in the beef sector. Scottish producers would have been an estimated £31.6m pounds better off if all EU countries had fully decoupled under the reforms. This highlights that Scottish Agriculture was disadvantaged by the decision made in 2003 to allow partial coupling of payments. In addition, even though it would have led to the removal of the Scottish Beef Calf Scheme, beef producers would have been better off if full decoupling had been implemented and Article 69 measures not allowed.