Since 1984, a quota regime is applied to the milk market in the European Union (EU). The objective of the regulation was to reduce surpluses in production, guarantee a fair income to farmers and maintain farms in production. The introduction of the system was a very controversial issue, because it was expected to slow down structural change considerably, thereby reducing the sector’s international competitiveness in the long run. This was especially relevant in the early stages of implementation when quota rights were attached to land and quota trade was not possible.
The initial quota allocations to member states and individual producers were made on the basis of production quantities in the years before 1984, freezing production patterns at the levels corresponding to the base year. Already in 1987, some member states started to allow temporary quota exchange using their discretion in implementing the system under the common EU regulation. Since then, considerable diversity in quota trade regulations across member states developed, covering the whole range between a free quota market and no quota transferability.