Case Study

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Case discussion questions

Question 1

If agricultural tariff and subsidies to producers were removed overnight, what would the impact be on the average consumer in develop nations such as the United States and the EU countries. What would be the impact on average farmer? Do you think the total benefits overweight the total costs, or vice versa?

For decades the rich countries of the developed world have levied subsidies on their farmers typically guaranteeing them a minimum price for the products they produce. The aim has been to protect the domestic industry from the foreign competition and give an impact on the average consumer in develop nations such as the United States and the EU countries If agricultural tariff and subsidies to producers were removed overnight, the average consumer in developed nations would probably see a slight rise in the cost of commodities as the commodity price reached a global equilibrium. The effect on the farmer would be more substantial because they would no longer be protected from international demand and prices. When it comes to determining whether the total benefits outweigh the total costs, there is no clear answer. In theory, free markets are better. However, the reality is that governments are involved in the markets, and so if the United States and EU countries eliminate trade barriers, the benefits might outweigh the costs, but it really depends in part on the political role of subsidies and the commitment to open markets in these countries and others. But other factors must be considered as well. Farmers could, for example, switch to more profitable crops than the ones that would be rendered uneconomical by the liberalization of tariffs and the removal of subsidies.

Question 2

Which do you think would help the citizens of the world’s poorest nations more, increasing foreign aid or removing all agricultural tariffs and subsidies?

The beneficiaries of agriculture are clearly...
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