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B the overlooking of the impact of changes of eu price support on the international terms of trade. It is rather difficult to estimate the loss of social welfare in terms of the misallocation of economic resources generated by milk production quotas. The impact on the efficiency of eu agricultural sector §5 and on its structural adjustment §6 is then examined, followed by the analysis of the broader impact of the cap on eu economy both in the short §7 and long term §8.

This is the case if the domestic target price does not substantially differ from the average long- term world market price. Frame 53 long- term cost curve: no government intervention. Terms of the question.

On the other hand, the larger the gap between domestic target price and the average long- term world market price, the greater is the price support effect of such policy measures and the distortions generated in domestic prices and investments. We could not estimate the impact of the likely changes in the international terms of trade under the assumption of a reduction of cap price support. In this first section we will outline the progressive escalation of the cap in terms of inefficient and inequitable policy measures implemented as a substitute for a reduction of domestic producer prices in order to maintain large income transfers to farmers. His recommendations were crystal clear and fully consistent with the long- term interests of farmers, of european consumers and with the interests of the european society as a whole.