Portugal trip report; Purdue University institute development program; April 18-May 23, 1981

The analysis is based on interviews with government and Portuguese University personnel and with researchers, field visits, and document review. The EC"s Common Agricultural Policy will necessitate a major overhaul of Portugal"s cheap food policy. Specifically, the government will have to: remove agricultural production and consumption subsidies; replace direct price determination with the EC price intervention mechanism; eliminate its marketing monopolies; adopt the EC"s common external tariffs and pursue free trade with other EC members; and implement the EC"s system of farm accounting used to set intervention prices. The resulting higher food prices will significantly reduce consumers" real income, with low-income consumers hurt the most. Grain producers will reap substantial benefits from the higher EC prices, but livestock producers, who rely heavily on purchased mixed feeds, will experience higher input and lower output prices. Fruit, vegetable, and wine producers will need to emphasize high quality or specialty products to ensure adequate profits. The magnitude of price changes will depend on the green rate of the Porteguese escudo. It is recommended that the escudo not be highly overvalued and that a structural assistance package be negotiated to improve the agricultural sector"s competitiveness. The six existing studies on the effects of EC accession are inadequate because they focus only on national implications. New research should include: (1) indepth case studies of selected subregions to account for the diversity of Portuguese agriculture; (2) regional sector models of commodity substitution supply effects; (3) econometric estimates of substitution demand systems, including microanalysis of farm-level effects; (4) research on the optimal green rate; (5) evaluation of long-range factor substitution effects on product mix and available technologies; and (6) identification of social programs that would most benefit agricultural development.