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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)




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?






–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)





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.




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.

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