Agricultural Subsidies and Globalisation

Agricultural Subsidies and Globalisation

Agricultural Subsidies and Globalization



This essay will discuss the effects that agricultural subsidies have on globalization. The main points that will be covered in regards to subsidies and their effects on worldwide productivity, poverty in undeveloped countries, the stance of the World Trade Organization (WTO) and International Monetary Fund (IMF) and some discussion on implementation. First, it would be prudent to define some terms that will be used in this paper.

Globalization is defined by Charles Hill as, "the shift toward a more integrated and interdependent world economy" and includes both the globalization of markets and production. (Hill, 2009, p.6) He goes on to define subsidies as the payments to a domestic producer ... Show more content on Helpwriting.net ...(Love & Lattimore, 2009, 71–74)

With an increase in GDP, developing countries would be able to shift resources from a subsistence level of inputs into agriculture towards infrastructure and education. Agricultural producers in undeveloped countries currently use low technology and high labour methods. As the undeveloped countries are able to advance in technology and knowledge, they would be able to move their production possibilities toward meeting worldwide demands. Undeveloped countries typically are producing for their own survival and little for foreign export, as production becomes more efficient and surplus is gained, then farmers would be able to export the excess to the world market. Smith points to the case of African cotton and its US production to show where subsidies hurt both productivity and trade. The United States cotton producers are subsidized by the government and this has depressed the prices worldwide by approximately a quarter which costs West African countries $200 million in lost foreign exchange. Over 11 million people rely on cotton for their income but with US subsidies in place it reduces the price and therefore income received. If subsidies were removed, Africa could produce at two–thirds the

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