European Community Milk Quotas: Impacts and Implications

Abstract

The past decade has been a period of worldwide overproduction of milk, depressed world markets for dairy products, and high costs of dairy price support programs. Ln response to these problems, the European Community instituted mandatory milk supply quotas in 1984. This study focused on the impacts of quotas on selected member states and the implications for the United States dairy industry of a similar milk supply management program. Conclusions regarding the European Community quota system follow. Milk quotas have been effective in reducing milk supplies and surplus stocks of dairy products in government storage. If milk quotas become permanent, there is the problem of them being capitalized into land values. Quotas have led to a problem of maintaining cash flow for the individual dairy farmer. Lack of effective quota transfer causes serious problems in countries in which regional specialization is occurring. Long-term use of quotas leads to rigidity in the production sector. Thus, even though milk quotas are effective in controlling milk production, there are problems associated with their use.