All these formal rules, including the European Union agricultural policy, are aimed in initiating economic change. Along with globalisation which promotes global free trade, the need for trade policies of importing and exporting products has to exacting under trade liberalisation laws. In June 2003, European Union (EU) farm ministers has reached the final compromise reform package has strayed a long way from the original agricultural policy that had been formulated in 1992.
The deal confirms the concept of 'partial decoupling', which was introduced this year, although member states have the option of a further two-year delay. The agreement also boosts the EU's rural development ambitions with a deal on compulsory 'modulation'. But although butter and SMP prices are to be cut, milk quota increases are delayed, and the cereals intervention price will remain unchanged (Agra Europe, 2003).
With trade liberalization under the General Agreement of Tariffs and Trade (GATT), hundreds enthusiastically adopted the regional trading arrangements that proliferated since its birth. The success recorded in the liberalization of international trade in the manufacturing sector has thus been matched by a reverse process of ever-escalating protection and subsidization in the agricultural sector. Could these agricultural policies drafted by the European Union promote more benefits or is this just another framework that would lead numerous promotion of selfish interests among bigger nations against smaller agricultural countries
Wielding their basic aim which is to increase agricultural production, ensure a fair standard of living for farmers, stabilise markets and guarantee the availability of supplies for consumers at reasonable prices, the EU agricultural policy has indeed come a long way. The pioneering principles of agricultural policy have been set out at Stresa Conference in July 1958., The CAP mechanisms were adopted in 1960 by the six founding member states and two years later, in 1962, the CAP came into force. The former CAP (Common Agricultural Policy) reform of the early 1990s can be viewed as a significant step toward increased economic efficiency in European agricultural sector. The major changes are essentially the introduction of compensatory payments and price support levels closer to long-run expected world prices. These changes essentially apply to the grain sector and, to a lesser extent, the beef sector.
The 1990s was a crucial decade because of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) negotiations has culminated in new trade agreements, including the Agreement on Agriculture. In North America, the Canada-United States Free Trade Agreement was broadened to include Mexico under the North America Free Trade Agreement. The World Trade Organization (WTO) supplanted GATT as the institution overseeing the resolution of international trade disputes and providing the organizational framework for new trade negotiations. The effects of the creation of the new institution and the continuing impact of regional trade blocs on agricultural trade received much attention among the affected policy communities. Several important issues began to emerge that would provide much of the impetus for future discussion and