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The relative importance of global agricultural subsidies and market access

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Author Info
ANDERSON, KYM
MARTIN, WILL
VALENZUELA, ERNESTO

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Abstract

The claim by global trade modelers that the potential contribution to global economic welfare of removing agricultural subsidies is less than one-tenth of that from removing agricultural tariffs puzzles many observers. To help explain that result, this paper first compares the OECD and model-based estimates of the extent of the producer distortions (leaving aside consumer distortions), and shows that 75% of total support is provided by market access barriers when account is taken of all forms of support to farmers and to agricultural processors globally, and only 19% to domestic farm subsidies. We then provide a back-of-the-envelope (BOTE) calculation of the welfare cost of those distortions. Assuming unitary supply and demand elasticities, that BOTE analysis suggests 86% of the welfare cost is due to tariffs and only 6% to domestic farm subsidies. When the higher costs associated with the greater variability of trade measures relative to domestic support are accounted for, the BOTE estimate of the latter s share falls to 4%. This is close to the 5% generated by the most commonly used global model (GTAP) and reported in the paper s final section.

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Publisher Info
Article provided by Cambridge University Press in its journal World Trade Review.

Volume (Year): 5 (2006)
Issue (Month): 03 (November)
Pages: 357-376
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Handle: RePEc:cup:wotrrv:v:5:y:2006:i:03:p:357-376_00

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anderson, Kym & Martin, Will, 2005. "Agricultural trade reform and the Doha development agenda," Policy Research Working Paper Series 3607, The World Bank. [Downloadable!]
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  2. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank. [Downloadable!]
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  3. Bernard Hoekman & Francis Ng & Marcelo Olarreaga, 2004. "Agricultural Tariffs or Subsidies: Which Are More Important for Developing Economies?," World Bank Economic Review, Oxford University Press, vol. 18(2), pages 175-204.
  4. Diao, Xinshen & Somwaru, Agapi & Roe, Terry, 2001. "A Global Analysis Of Agricultural Trade Reform In Wto Member Countries," Bulletins 12984, University of Minnesota, Economic Development Center. [Downloadable!]
  5. Huff, Karen & Thomas W. Hertel, 2001. "Decomposing Welfare Changes in GTAP," GTAP Technical Papers 308, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
  6. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
  7. Anderson, Kym & Valenzuela, Ernesto, 2005. "Do Global Trade Distortions Still Harm Developing Country Farmers?," CEPR Discussion Papers 5337, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Anderson, Kym & Valenzuela, Ernesto, 2006. "Do global trade distortions still harm developing country farmers ?," Policy Research Working Paper Series 3901, The World Bank. [Downloadable!]
    Other versions:
  2. Anderson, Kym & Croser, Johanna & Sandri, Damiano & Valenzuela, Ernesto, 2009. "Agricultural Distortion Patterns Since the 1950s: What Needs Explaining?," Agricultural Distortions Working Paper 50305, World Bank. [Downloadable!]
  3. Anderson, Kym & Martin, Will & van der Mensbrugghe, Dominique, 2006. "Doha merchandise trade reform : what's at stake for developing countries ?," Policy Research Working Paper Series 3848, The World Bank. [Downloadable!]
    Other versions:
  4. Romain Perez & Mustapha Sadni Jallab, 2009. "Preference erosion and market access liberalization: the African dilemma in multilateral negotiations on agriculture," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 277-292, July. [Downloadable!] (restricted)
  5. Martin, Will & Anderson, Kym, 2006. "The Doha Agenda and Agricultural Trade Reform: The Role of Economic Analysis," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25628, International Association of Agricultural Economists. [Downloadable!]
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  6. George Verikios & Kevin Hanslow, 2009. "The Long-Run Effects of Structural Change and the Treatment of International Capital Accumulation, Mobility and Ownership," Centre of Policy Studies/IMPACT Centre Working Papers g-179, Monash University, Centre of Policy Studies/IMPACT Centre. [Downloadable!]
  7. Anderson, Kym & Valenzuela, Ernesto, 2006. "The World Trade Organization's Doha cotton initiative : a tale of two issues," Policy Research Working Paper Series 3918, The World Bank. [Downloadable!]
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  8. Kenneth Reinert, 2007. "The European Union, the Doha Round, and Asia," Asia Europe Journal, Springer, vol. 5(3), pages 317-330, September. [Downloadable!] (restricted)
  9. Anderson, Kym & Kurzweil, Marianne & Martin, Will & Sandri, Damiano & Valenzuela, Ernesto, 2008. "Methodology for Measuring Distortions to Agricultural Incentives," Agricultural Distortions Working Paper 48326, World Bank. [Downloadable!]
  10. Anderson, Kym & Valenzuela, Ernesto, 2006. "WTO's Doha Cotton Initiative: A Tale of Two Issues," CEPR Discussion Papers 5567, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Hoekman, Bernard & Vines, David, 2007. "Multilateral Trade Cooperation: What Next?," CEPR Discussion Papers 6458, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Anderson, Kym & Valenzuela, Ernesto & Van Der Mensbrugghe, Dominique, 2009. "Welfare and Poverty Effects of Global Agricultural and Trade Policies Using the Linkage Model," Agricultural Distortions Working Paper 52785, World Bank. [Downloadable!]
  13. Lopez, Ramon & Islam, Asif, 2008. "When Government Spending Serves the Elites: Consequences for Economic Growth in a Context of Market Imperfections," Working Papers 45875, University of Maryland, Department of Agricultural and Resource Economics. [Downloadable!]
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