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Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultural product markets. Outcomes can range from guaranteed supply level, price stability, product quality, product selection, land use or employment.
Basic policy tools
Subsidies Governments pay subsidies to encourage domestic production of a good. Such subsidies are necessary when a government wants to alter the free-market outcome in product markets. The subsidies transfer some costs of production from producers to the government, allowing production at above-market costs. The effect of Western food subsidies [360$ billion] is overwhelmingly to reduce world prices. For decades the 3rd world has earned only half the free market price for food, its primary product. Consumption subsidies can also be used to alter markets. A consumption subsidy offsets a portion of the purchase price of a product. In economics, a subsidy is generally a monetary grant given by government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. ...
Price controls Price floors or ceilings set a minimum or maximum price for a product. Price controls alter free-market outcomes by encouraging over-production by a price floor or over-consumption by a price ceiling. Jump to: navigation, search A Price floor is a government-imposed limit on how low a price can be charged for a product. ...
A Price Ceiling is a government-imposed limit on how high a price can be charged on a product. ...
Import barriers A government can erect trade barriers to limit the quantity of goods imported (in the case of a quota) or enact tariffs to raise the domestic price of imported products. These barriers give preference to domestic producers. A trade barrier is general term that describes any government policy or regulation that restricts international trade, the barriers can take many forms, including: Import duties Import licenses Export licenses Quotas Tariffs Subsidies Non-tariff barriers to trade Most trade barriers work on the same principle: the imposition of some...
A quota is a prescribed number or share of something. ...
Jump to: navigation, search A tariff is a political act, sometimes known as the customs duty. ...
Objectives of market intervention
National security Some argue that nations have an interest in assuring there is sufficient domestic production capability to meet domestic needs in the event of a global supply disruption. Significant dependence on foreign food producers makes a country strategically vulnerable in the event of war, blockade or embargo. Maintaining adequate domestic capability allows for food self-sufficiency that lessens the risk of supply shocks due to geopolitical events. Agricultural policies may be used to support domestic producers as they gain domestic and international market share. This may be a short term way of encouraging an industry until it is large enough to thrive without aid. Or it may be an ongoing subsidy designed to allow a product to compete with or undercut foreign competition. This may produce a net gain for a government despite the cost of interventions because it allows a country to build up an export industry or reduce imports.
Farm or undeveloped land composes the majority of land in most countries. Policies may encourage some land uses rather than others in the interest of protecting the environment. For instance, subsidies may be given for particular farming methods, forestation, land clearance, or pollution abatement. Jump to: navigation, search Environmental movement is a term often used for any social or political movement directed towards the preservation, restoration, or enhancement of the natural environment. ...
Land management can be defined as the process of managing the use and development of land resources in a sustainable way. ...
Rural poverty and unemployment relief Subsidising farming may encourage people to remain on the land and obtain some income. This might be relevant to a third world country with many peasant farmers, but it may also be a consideration to more developed countries such as Poland. This has a very high unemployment rate, much farmland and retains a large rural population growing food for their own use. Price controls may be used to assist poor citizens. Many countries have used this method of welfare support as it delivers cheap food to the poorest without the need to assess people to give them financial aid.
See green economists. Some argue that small gardens and greenhouses should be favored, especially if produce is consumed locally. Some argue for tax, tariff and trade rules to exempt such production for local use, especially family farm or farm co-op production, and strongly deny that agricultural and industrial policy should be linked, or should be subject to the same law. One rationale is that local production of organic produce by families in their own gardens for their own consumption is not taxed or regulated, and that little or no use of the energy-and-land-intensive transport system, or energy-and-labor intensive regulation system is required for these same people to sell the same product to neighbors. Jump to: navigation, search Organic farming is a way of agriculture that relies on ecosystem management rather than external agricultural inputs. ...
Green economics loosely defines a theory of economics by which an economy is considered to be component of the ecosystem in which it resides. ...
The family farm is a farm owned and operated by a family. ...
A farm co-op is a cooperative business owned by farmers, to produce or (usually) store and market agricultural products. ...
- Fair trade rules to ensure that poor farmers in underdeveloped nations that produce crops primarily for export are not exploited to put local farmers in developing nations out of work - which advocates consider a dangerous "race to the bottom" in agricultural labor and safety standards. Opponents point out that most agriculture in developed nations is produced by industrial corporations (agribusinesses) which are hardly deserving of sympathy, and that the alternative to exploitation is poverty.
Safe trade is a concept advocated by Greenpeace, some indigenous peoples (particularly those who feel threatened by the imposition of a monoculture) and by some elements of the anti-globalization movement. ...
Jump to: navigation, search A genetically modified food is a food product derived in whole or part from a genetically modified organism (GMO) such as a crop plant, animal or microbe such as yeast. ...
Monoculture describes systems that have very low diversity. ...
Jump to: navigation, search Greenpeace is an international environmental organisation founded in Vancouver, British Columbia, Canada in 1971. ...
Jump to: navigation, search Fair trade products shown at XI Unctad. ...
In government regulation, a race to the bottom is said to occur when competition between nations (over investment capital, for example) leads to the progressive dismantling of regulatory standards. ...
In agriculture, agribusiness is a generic term that refers to the various businesses involved in the food production chain, including farming, seed, agrichemicals, farm machinery, wholesaling, processing, distribution, and retail sales. ...
Arguments against market intervention
Dumping is harmful to developing world farmers When rich countries subsidize domestic production, excess output is often given to the developing world as foreign aid. This process eliminates the domestic market for agricultural products in the developing world, because the products can be obtained for free from western aid agencies. In developing nations where these effects are most severe, small farmers could no longer afford basic inputs and were forced to sell their land.
"Consider a farmer in Ghana who used to be able to make a living growing rice. Several years ago, Ghana was able to feed its people and export their surplus. Now, it imports rice. From where? Developed countries. Why? Because it's cheaper. Even if it costs the rice producer in the developed world much more to produce the rice, he doesn't have to make a profit from his crop. The government pays him to grow it, so he can sell it more cheaply to Ghana than the farmer in Ghana can. And that farmer in Ghana? He can't feed his family anymore."(Lyle Vanclief, Canadian Minister of Agriculture)
According to The Institute for Agriculture and Trade Policy, corn, soybeans, cotton, wheat and rice are sold below the cost of production, or dumped. Dumping rates are approximately forty percent for wheat, between twenty-five and thirty percent for corn (maize), approximately thirty percent for soybeans, fifty-seven percent for cotton, and approximately twenty percent for rice. For example, wheat is sold for forty percent below cost.
According to Oxfam, "If developed nations eliminated subsidy programs, the export value of agriculture in lesser developed nations would increase by 24 percent, plus a further 5.5 percent from tariff equilibrium. ... exporters can offer US surpluses for sale at prices around half the cost of production; destroying local agriculture and creating a captive market in the process."
Free trade advocates desire the elimination of all market distorting mechanisms (subsidies, tariffs, regulations) and argue that, as with free trade in all areas, this will result in aggregate benefit for all. This position is particularly popular in competitive agricultural exporting nations in both the developed and developing world, some of whom have banded together in the Cairns Group lobby. Canada's Department of Agriculture estimates that developing nations would benefit by about $4 billion annually if subsidies in the developed world were halved. Jump to: navigation, search The Cairns Croup is an interest group of 17 agricultural exporting countries: Argentina, Australia , Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay. ...
Percentage of population in agriculture: app. five percent in the E.U. and 1.7 percent in the U.S.
Developed world cases
Overview: Europe and America The total value of agricultural production amounted to 128 billion euros (1998). About forty-nine percent of this amount was accounted for by political measures: 37 billion euros due to direct payments and 43 billion euros from consumers due to the artificially high price. Eighty percent of European farmers receive a direct payment of 5,000 euros or less, while 2.2 percent receive a direct payment above 50,000 euros, totaling forty percent of all direct subsidies.
The average U.S. farmer receives $16,000 in annual subsidies. Two-thirds of farmers receive no direct payments. Of those that do, the average amount amongst the lowest paid eighty percent was $7000 from 1995-2003. (http://www.ewg.org/farm/findings.php) Subsidies are a mix of tax reductions, direct cash payments and below-market prices on water and other inputs. Some claim that these aggregate figures are misleading because large agribusinesses, rather than individual farmers, receive a significant share of total subsidy spending. The Freedom to Farm Act of 1996 reduced farm subsidies, providing fixed payments over a period and replacing price supports and subsidies. The Farm Bill (2002) contains direct and countercyclical payments designed to limit the effects of low prices and yields. In agriculture, agribusiness is a generic term that refers to the various businesses involved in the food production chain, including farming, seed, agrichemicals, farm machinery, wholesaling, processing, distribution, and retail sales. ...
Environmental programs The U.S. Conservation Reserve Program leases land from producers that take marginal land out of production and convert it back to a near-natural state by planting native grasses and other plants. See [1] The U.S. Environmental Quality Incentives Program subsidizes improvements which promote water conservation and other measures. This program is conducted under a bidding process using a formula where farmers request a certain percentage of cost share for an improvement such as drip irrigation. Producers that offer the most environmental improvement based on a point system for the least cost are funded first. The process continues until that year's allocated funds are expended. See [2]. Water resources are sources of water that are useful to human beings for drinking, recreation, irrigation, livestock production, industry, etc. ...
World Trade Organization Actions In April 2004 the WTO ruled that 3-billion dollars in US cotton subsidies violate trade agreements and that almost 50% of EU sugar exports are illegal. In 1997-2003, US cotton exports were subsidised by an average of 48%.[3]
The World Trade Organisation (WTO) has extracted commitments from the Philippines government, making it lower import barriers to half their present levels over a span of six years, and allowing in drastically increased competition from the industrialised and heavily subsidised farming systems of North America and Europe. A recent Oxfam report estimated that average household incomes of maize farmers will be reduced by as much as 30% over the six years as cheap imports from the US drive down prices in the local markets. The report estimates that in the absence of trade restrictions, US subsidised maize could be marketed at less than half the price of maize grown on the Philippine island of Mindanao; and that the livelihoods of up to half a million Filipino maize farmers (out of the total 1.2 million) are under immediate threat. For other uses of the initials WTO, see WTO (disambiguation). ...
Jump to: navigation, search Oxfam International, founded in 2000, is a confederation of 12 independent, not-for-profit, secular, community-based aid and development organisations who work with local partners in over 100 countries worldwide to reduce poverty, suffering, and injustice. ...
Jump to: navigation, search Binomial name Zea mays L. Maize (Zea mays ssp. ...
Map of the Philippines showing the island groups of Luzon, Visayas, and Mindanao. ...
For More Information Trade is a key factor in economic development. ...
Agricultural economics applies the principles of economics to the production of crops and livestock. ...
Jump to: navigation, search The Common Agricultural Policy (CAP) is a system of European Union agricultural subsidies which represents about 44% of the EUs spending (€43bn). ...
The Corn Laws, in force between 1815 and 1846, were import tariffs ostensibly designed to protect British farmers and landowners, against competition from cheap foreign grain imports. ...
Land reform (also agrarian reform although that can have a broader meaning) is the government-initiated or government-backed redistribution of — i. ...
Barriers to international trade can take many forms, including: import duties import licenses export licenses import taxes tariffs agricultural subsidies non-tariff barriers However, most trade barriers all work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. ...
External links - kickAAS (Kick all agricultural subsidies)
- The Globalist | Global Agriculture -- Getting Tough on ... - November 12, 2003
- Ashish's Niti (Developing countries should take advantage of agricultural subisides)
- India together
- Larry Elliott, The Guardian, June 15, 2005, "West accused of concealing farm subsidies: Oxfam says EU and US are exploiting loopholes and using creative accounting to avoid real trade concessions to developing countries"
- Institute for Agriculture and Trade Policy
- Sophia Murphy, Ben Lilliston and Mary Beth Lake, February 2005, "WTO Agreement on Agriculture: A Decade of Dumping", Institute for Agriculture and Trade Policy
- Kym Anderson and Will Martin (2005), "Agriculture Market Access: The Key to Doha Success", World Bank, June 2005 - over half the gains to developing countries from global agricultural reforms would come from liberalization by developing countries themselves.
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