Agricultural Subsidies and Globalisation
Agricultural Subsidies and Globalization
This essay will discuss the effects that agricultural subsidies have on globalization. The main points that will be covered in regards to subsidies and their effects on worldwide productivity, poverty in undeveloped countries, the stance of the World Trade Organization (WTO) and International Monetary Fund (IMF) and some discussion on implementation. First, it would be prudent to define some terms that will be used in this paper.
Globalization is defined by Charles Hill as, “the shift toward a more integrated and interdependent world economy” and includes both the globalization of markets and production. (Hill, 2009, p.6) He goes on to define subsidies as the payments to a domestic producer which takes the forms of grants, low-interest loans, and tax breaks. (Hill, 2009, p.208) With these important points being defined, we can focus on how agricultural subsidies and tariffs provided by governments affect the global marketplace.
Agricultural subsidies are a form of protectionism for the industry by the government. The World Trade Organization (WTO) commenced addressing this in its DOHA Round but prior to that it was on the agenda for the General Agreement on Tariffs and Trade (GATT). Agriculture has typically been given higher tariffs than other manufactured goods or services. This means consumers pay higher prices than needed for imported agricultural products thereby reducing their ability to purchase other goods and services. (Hill, 2009, p.228). The WTO points to the benefit of removing tariff barriers and subsidies is to boost worldwide trade levels, lower consumer prices and increasing economic growth globally since funds could then be used for investment in additional productive resources and other consumption needs. (Hill, 2009, p.228)
As we have seen in previous courses with supply, demand and subsidies, subsidies can be used to promote the underallocation of resources via a subsidy. In agriculture,
This essay will discuss the effects that agricultural subsidies have on globalization. The main points that will be covered in regards to subsidies and their effects on worldwide productivity, poverty in undeveloped countries, the stance of the World Trade Organization (WTO) and International Monetary Fund (IMF) and some discussion on implementation. First, it would be prudent to define some terms that will be used in this paper.
Globalization is defined by Charles Hill as, “the shift toward a more integrated and interdependent world economy” and includes both the globalization of markets and production. (Hill, 2009, p.6) He goes on to define subsidies as the payments to a domestic producer which takes the forms of grants, low-interest loans, and tax breaks. (Hill, 2009, p.208) With these important points being defined, we can focus on how agricultural subsidies and tariffs provided by governments affect the global marketplace.
Agricultural subsidies are a form of protectionism for the industry by the government. The World Trade Organization (WTO) commenced addressing this in its DOHA Round but prior to that it was on the agenda for the General Agreement on Tariffs and Trade (GATT). Agriculture has typically been given higher tariffs than other manufactured goods or services. This means consumers pay higher prices than needed for imported agricultural products thereby reducing their ability to purchase other goods and services. (Hill, 2009, p.228). The WTO points to the benefit of removing tariff barriers and subsidies is to boost worldwide trade levels, lower consumer prices and increasing economic growth globally since funds could then be used for investment in additional productive resources and other consumption needs. (Hill, 2009, p.228)
As we have seen in previous courses with supply, demand and subsidies, subsidies can be used to promote the underallocation of resources via a subsidy. In agriculture,
References: Agricultural Subsidies, Ploughing On: The Rich World’s Farmers are Still Reaping Handsome Subsidies, The Economist, July 1, 2010 retrieved on November 04, 2010 from http://www.economist.com/node/16507149 Hill, Charles W. L. (2009). International Business: Competing in the Global Marketplace 7th Edition. New York: McGraw-Hill/Irwin. Ingco, Merlinda D. and Nash, John D. (2004). Agriculture and the WTO: Creating A Trading System for Development. Washington:World Bank and Oxford University Press. Lattimore, Ralph and Love, Patrick. (2009). International Trade: Free, Fair and Open? OECD Insights series, 2009, pp 71-74. Luciani, Patrick. (2004). Economic Myths: Making Sense of Canadian Policy Issues 4th Edition. Toronto: Pearson Education Canada Inc. Mankiw, N. G., Kneebone, R. D., McKenzie, K. J., and Rowe, N. (2008). Principles of Microeconomics. (4th Cdn. ed.). Toronto: Thomson Nelson. Smith, Michael. (2003, October 1). Globalization ... as if people really mattered: can big business and activists agree on fighting poverty? The Free Library. (2003). Retrieved November 16, 2010 from http://www.thefreelibrary.com/Globalization ... as if people really mattered: can big business and...-a0110916289 Standaert, Michael. (2004, May 1). World’s Farmers Struggle with Globalization Issues. Global Envision: Retrieved November 8, 2010 from http://www.globalenvision.org/library/6/577 The Daily Star Volume 5 Number 510 (October 31, 2005). Retrieved November 10, 2010 from http://www.thedailystar.net/2005/10/31/d51031051557.htm