CASE ANALYSIS: Agricultural Subsidies

Case Analysis Read the  CASE ANALYSIS: Agricultural Subsidies (page 144). 

 

Write a 5 page paper (1500 or morewords)  in APA format in response to these questions at least siting four peer reviewed journals articles

 

a. Provide an overview of this case analysis; summarize the key points

 

b.Discuss how the Uraguay Round and the Doha Development Agenda impact  agricultural subsidies. 

 

c.Discuss the findings in Table 7.3 (page 145). How would you address the findings in a presentation? 

 

 

 

Below is a recommended outline.

 

4. Cover page (See APA Sample paper)

 

5.Introduction 

 

a.A thesis statement

 

b.Purpose of paper

 

c.Overview of paper

 

6. Body (Cite sources using in – text citations.)

 

a. Provide an overview of this case analysis; summarize the key points

 

b. Discuss how the Uraguay Round and the Doha Development Agenda impact agricultural  subsidies. 

 

c. Discuss the findings in Table 7.3 (page 145). How would you address the findings in a  presentation?

 

 

 

Conclusion 

 

–Summary of main points

 

a. Lessons Learned and Recommendations

 

 

 

3. References 

 

– List the references you cited in the text of your paper according to APA format. 

 

(Note: Do not include references that are not cited in the text of your paper)

 

 

Pg144

 

The Logic of Collective Action

 

Given that the costs to consumers are so high for each job saved,why do people tol-

 

erate tariffs and quotas? Ignorance is certainly the case for some goods,but for some

 

tariffs and quotas,the costs have been relatively well publicized.For example,many

 

people are aware that quotas on sugar imports cost each man,woman,and child in

 

the United States between $5 and $10 per year.The costs are in the form of higher

 

prices on candy bars,soft drinks,and other products containing sugar.Few of us work

 

in the sugar industry,so the argument that our jobs depend on it is weak at best.

 

In a surprising way, however, we probably permit our tariffs and quotas

 

because of a version of the jobs argument.The economist Mancur Olson studied

 

this problem and similar ones and noticed two important points about tariffs and

 

quotas.First,the costs of the policy are spread over a great many people.Second,

 

the benefits are concentrated.For example,we all pay a little more for candy bars

 

and soft drinks,but a few sugar producers reap large benefits from our restrictions

 

on sugar imports.Olson found that in cases such as this,there is an asymmetry in

 

the incentives to support and to oppose the policy.With trade protection,the ben-

 

efits are concentrated in a single industry and,consequently,it pays for the indus-

 

try to commit resources to obtaining or maintaining its protection.The industry

 

will hire lobbyists and perhaps participate directly in the political process through

 

running candidates or supporting friendly candidates. If people in the industry

 

think their entire livelihood depends on their ability to limit foreign competition,

 

they have a very large incentive to become involved in setting policy.

 

The costs of protection are nowhere near as concentrated as the benefits

 

because they are spread over all consumers of a product.The $5 to $10 per year

 

that sugar quotas cost each of us is hardly worth hiring a lobbyist or protesting inWashington. Thus, one side pushes hard to obtain or keep protection, and the

 

other side is silent on the matter. Given this imbalance, an interesting question

 

asks why there are not more trade barriers.

 

 

 

C A S E  S T U D Y

 

Agricultural Subsidies

 

Agricultural issues have long sparked conflict among the members of the WTO.

 

Some cases have pitted high-income countries against each other, among them

 

disputes between the United States and Japan over apples and EU-U.S.disputes

 

over bananas. More recently, the WTO’s Doha Development Agenda has tried

 

to address agricultural issues that are central to relations between developing

 

and industrial countries. In particular, three issues are on the table: tariffs and

 

quotas (market access), export subsidies given by countries to encourage farm

 

exports,and production subsidies granted directly to farmers.

 

Direct subsidies are viewed as harmful because they lead to overproduction,

 

squeeze out imports,and in some cases result in the dumping of the surplus product

 

 

 

 

Chapter 7 Commercial Policy 145

 

TABLE 7.3 Agricultural Subsidies, 2007

 

                                                                                                                                                                                                                        Agricultural Subsidies

 

 (Millions of US$)                         As a Percent of 

 

                                                                                                       Farm Receipts

 

Australia                                              1,827                                       6

 

Canada                                                7,001                                       18

 

European Union                                  134,318                                   26

 

Japan                                                   35,230                                     45

 

United States                                      32,663                                     10

 

The EU provides the largest subsidies, both in absolute terms and as a share of GDP but

 

Japanese farmers are more dependent on agricultural subsidies.

 

Source: OECD, Producer Support Estimate by Country. http://www.oecd.org/tad/support/psecse.

 

 

 

in foreign markets. The original GATT agreement included language on agricul-

 

ture, but there were so many loopholes that it had little impact. Not until the

 

Uruguay Round was finalized in 1993,nearly 50 years after the signing of the origi-

 

nal GATT agreement, were significant changes made in the rules for agricultural

 

trade. Many quotas were converted to tariffs, and industrial countries agreed to

 

reduce their direct support for the farm sector by 20 percent.Indirect supports such

 

as research and development and infrastructure construction were recognized as

 

necessary,desirable,and permissible.

 

While direct-support payments were curtailed, the Uruguay Round left

 

intact direct payments to farmers that theoretically do not increase production,

 

are part of a country’s environmental or regional development plan, or are

 

intended to limit production. If you think these are a lot of loopholes, you are

 

right. Consequently, the current round of trade negotiations, the Doha

 

DevelopmentAgenda,has taken up the issue of agriculture again,and develop-

 

ing countries in particular are pushing to limit government practices that block

 

their access to markets in high-income countries or that subsidize production

 

by industrial countries.

 

Table 7.3 shows the range of direct-support payments to agricultural producers

 

in many industrial nations. The twenty-seven members of the EU are grouped

 

together because their trade and agricultural policies are formulated at the EU

 

level,not at the national level.In terms of both absolute support and the percent-

 

age of its GDP that it transfers to farmers,the EU is the biggest subsidizer.Japan

 

is close in percentage terms but is at about one-half the level in absolute dollar

 

amounts.The United States is also a large subsidizer, and Canada is similar. Not

 

all countries subsidize agriculture, however. Australia’s supports are less than

 

one-half the level of the United States as a share of GDP, , and despite the lower

 

support levels,it uses its comparative advantages to be among the top fifteen agri-

 

cultural exporting countries in the world.