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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, the authors first compare the OECD and model-based estimates of the extent of the producer distortions (leaving aside consumer distortions), and show that 75 percent 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 percent to domestic farm subsidies. Then the authors 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 percent of the welfare cost is due to tariffs and only 6 percent 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 percent. This is close to the 5 percent generated by the most commonly used global model (GTAP) and reported in the paper's final section.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3900.

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Date of creation: 01 Apr 2006
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Handle: RePEc:wbk:wbrwps:3900

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Related research
Keywords: Economic Theory&Research; Markets and Market Access; Free Trade; Trade Law; Tax Law;

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This paper has been announced in the following NEP Reports: 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. 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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  2. 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.
  3. 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!]
  4. 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!]
  5. 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!]
  6. 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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  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. 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)
  2. 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!]
  3. Hoekman, Bernard & Vines, David, 2007. "Multilateral Trade Cooperation: What Next?," CEPR Discussion Papers 6458, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. 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!]
  5. 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!]
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  6. Kenneth Reinert, 2007. "The European Union, the Doha Round, and Asia," Asia Europe Journal, Springer, vol. 5(3), pages 317-330, September. [Downloadable!] (restricted)
  7. 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)
  8. 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:
  9. 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!]
    Other versions:
  10. 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!]
  11. 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!]
  12. 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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  13. 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!]
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