The Relative Importance of Global Agricultural Subsidies and Market Access

Kym Anderson, Will Martin and Ernesto Valenzuela

No 5569, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 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. 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 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.

Keywords: Trade policy reform; Computable general equilibrium modeling; Agricultural protection; Economic welfare (search for similar items in EconPapers)
JEL-codes: C68 D58 Q17 Q18 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-agr and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Journal Article: The relative importance of global agricultural subsidies and market access (2006)
Working Paper: The Relative Importance of Global Agricultural Subsidies and Market Access (2006)
Working Paper: The relative importance of global agricultural subsidies and market access (2006)
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