I’m unclear as to whether the EU has made substantial strides in eliminating its non-export agricultural subsidies as a market distortion.

At a July 7, 2005 event at the Washington Council on International Trade, Nikolaos Zaimis, an EU trade delegate, said that, for domestic subsidies, the EU will shift to an income-based regime as of January 1, 2006, terminating its production-linked subsidies (this severance is known as “decoupling”). This shift will be very costly — the EU will pay guaranteed incomes to farmers equal to their average subsidy receipts in the last few years. However, this means that farmers will now respond to market incentives in making their production decisions, as the marginal revenues associated with various output levels are entirely unaffected by subsidies.

Does anyone know if the EU is really committed to 100% decoupling in 2006? Prior policy commitments, such as the 2003 reform of the Common Agricultural Policy, implemented a variety of minimum levels for decoupled payments, ranging from 40% for tobacco to 75% for grains. Was Zaimis mislabelling the EU’s previous partial decoupling as a more significant shift, or are there new policies taking effect in 2006?