Essay on Agricultural Subsidy

3017 WordsMar 11, 201213 Pages
Agricultural subsidies and tariffs have been widely debated for several years and this is an issue that is not going away. There is no doubt that the subsidies and tariffs have benefits for some while simultaneously being detrimental to others. The chief area of concern is regarding the faceoff between developed nations, such as the United States and the European Union, and underdeveloped or growing nations, such as Brazil and African nations. What essentially is occurring is that a developed nation comes up with a price that they feel an agricultural product should be bought and sold at in the world market. Once they have this figure, if the going rate of the product dips below the number then the governments respond by giving subsidies…show more content…
A removal of agricultural subsidies will benefit the average consumer as they will have to pay less tax. Giving subsidies to firms may encourage inefficiency, because the firms can rely on government aid. Competition, quality and efficiency will therefore increase from a removal of a subsidy. Although dumping and loss of earnings hinders the agricultural development in developing countries, agricultural subsidy cannot be removed in developed areas, such as Europe and the US, mostly because of two reasons; political and economic. Developed countries favour subsidies as it benefits domestic farmers and not the unsubsidised foreign farmers. Farmers have a strong voting power and therefore, politicians will use subsidies to gain votes. Those who are voted into power, generally sell themselves by being in support of high subsidies.Tariffs increase the cost of imports, therefore the removal of tariffs will lead to an increase in consumer surplus. For example, UK consumers have lost out from EU wide tariffs on agricultural products. Many agricultural goods are more expensive because of the high tariffs placed to protect EU farmers. The use of comparative advantage for trading and removal of tarrifs will lead to lower prices for the average consumers. It is hard to think of any benefits from tariff’s for consumers. Maybe in the long run consumers benefit from the protection of domestic industries if these industries use the tariffs to improve. Domestic
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