Agricultural Subsidies: Pros and Cons

Paper Summary:

This paper deals with the issue of free trade in agricultural products versus protectionism that is one of the fiercest international economic debates. It discusses the arguments of the proponents of free trade who believe in opening the global market with as few restrictions on trade as possible and those of the proponents of protectionism who believe in concentrating on the welfare of the domestic farming community. The stage at which the talks over subsidies take place is the World Trade Organization ("WTO").

Paper Outline:
Introduction
The Economics of Agriculture
Some Numbers
A Comparative Advantage of the Poor
The Reasons for Protectionism
The WTO and the Prisoner's Dilemma

From the Paper:

"However, why do the rich countries like those of the European Union as well as the US today still subsidize their farmers to the tune of billions of dollars a year? Beginning in the 1930s most industrialized countries developed agricultural price-support policies to reduce the volatility of prices for farm products and to increase, or at least stabilize, farm income. Subsequently, in food-exporting countries, such as the United States and France, agricultural subsidies have been designed primarily to increase farm income, either by raising the long-term level of prices above free-market levels or by providing direct payments to farmers."

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