Agricultural subsidies and development essay 2

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Agricultural subsidies and development essay 2

By | May 2011
Page 1 of 2
Agricultural Subsidies and Development

1. The removal agricultural tariffs and subsides, according to Oxfam, would benefit developed nations because their consumers would benefit from lower domestic agricultural prices and the elimination of the taxes they must pay in order to support the subsidies. The producers in the developed world would lose this government protection from competition as well as the financial incentives. I believe there would be a net benefit from changing our agricultural policy because: ▪ The government program distorts a functioning market. A functioning market allows capital (investment) to flow where it can gain the highest return. If a good or product can be produce more efficiently outside of the United States, the producer and consumer benefit. The benefit to the consumer in lower prices, improved product quality and lower taxes, helps the US economy by increasing the consumer’s buying power. The higher purchasing power changes the US consumers’ outlook on their personal wealth, and thereby their future spending. The so-called wealth effect occurs when consumers’ perception of their finances allow them to spend more of their income. This higher propensity to consume by US consumers should offset the loss of domestic spending on agricultural products. ▪ The increase of trade also enables the more efficient producer to reciprocate in buying products or services from the US where we have a competitive advantage. Therefore, in addition to the gain in consumer spending from the improvement of consumer purchasing power, the US will gain additionally from purchases from their new trade relationship.

2. I believe that removing agricultural tariffs and subsidies will help the citizens of the world’s poorest nations. As one UN official has noted. “It’s no good building up roads clinics, and infrastructure in poorer areas if you don’t give them access to markets and engines for growth.” Increasing demand for...