|dc.description.abstracteng||The Common Agricultural Policy of the European Union (CAP) has a long tradition. After World War II, agricultural and food production in Europe was substantially weakened and unable to provide sufficient food for the domestic population. The CAP emerged from this situation, with the objectives of increasing agricultural productivity and thereby ensuring the standard of living of the population engaged in agriculture, as well as stabilizing markets and ensuring a supply of food for the population at reasonable prices. With substantial market interventions, effective external protection as well as a considerable financial effort, the EU has thereby promoted a structural change in European agriculture. The various measures ultimately led to overproduction, negative effects on other countries, especially developing countries with little domestic support, and an explosion of the budget for the CAP.
The Uruguay Round resulted in the Agreement on Agriculture (AoA) in 1994 which can be seen as a significant step in reducing market-distorting mechanisms in agricultural and trade policies. Although the CAP's support for domestic agriculture has been adjusted in a series of successive reforms in line with the requirements of the AoA, several mechanisms are still in place today that are in fact incompatible with the AoA.
This thesis examines the effects of these mechanisms on agricultural markets at home and abroad and helps to gain an understanding of the harmful effects of market interventions and to quantify them. It consists of two essays, each addressing a component of the overarching question. The first paper, "Effects of variable EU import levies on corn price volatility", analyzes the effects of the EU's variable import levy for corn imports on corn price volatility in the EU and Argentina, a large exporter of corn. Using a multivariate asymmetric GARCH model, we quantify the effect of the levy on volatility. Consistent with theoretical expectations from the literature, the results show that the variable import levy reduces corn price volatility in the EU and increases it in Argentina to the exact same extent. It therefore confirms the theoretical assumption that price insulating instruments, such as variable tariffs, are not able to prevent price volatility, but shift it abroad.
In the second article of this dissertation, "Price formation in the European sugar market", we analyze the price transmission processes on the EU sugar market. Despite an ongoing liberalization of agricultural trade in numerous agricultural commodities and the reduction of market distorting interventions by the CAP, the sugar market is still affected by market interventions to a large extent. In addition to a protective import tariff and a complex system of preferential trade agreements and tariff rate quotas, the sugar market is characterized by partially coupled direct payments and oligopolistic market structures among sugar producers. Until 2017, there was also a production quota in place. Presumably, this had a considerable effect on market integration with the world market and thus on price transmission processes. We have therefore used an asymmetric price transmission model in error correction form to estimate the dynamics that arise in the relationship between the reported factory price for white sugar in the EU on the one hand and the world market price, the ACP import price and the EU spot market price on the other. The results show that the EU price is decoupled to a large extent from the world market price and that movements in the world market price affect the reported factory price in the EU only into one direction. This is explained by effective price insulation through EU market intervention and by market power among sugar producers.
Based on these contributions, we draw several conclusions. First, studies have shown that the EU still partially ignores effects in countries outside the EU when supporting domestic agriculture - although distortions have been substantially reduced since the AoA. However, nearly 30 years after the completion of the AoA, we can reaffirm the importance of consistently implementing and pursuing commitments to reduce market-distorting policy instruments. The effects of domestic market interventions can still reach far beyond national borders. It should therefore be acknowledged by policy makers that a well functioning global trade with agricultural and food commodities is essential to achieve market stability in a global context and to buffer shocks to regional supply and demand.||de