Agriculture

Agriculture is one of the most divisive issues in trade today. It is easily the most distorted sector, with high tariffs and, in developed countries at least, large amounts of government subsidies through price supports and direct payments. On the other hand, developing countries, who have a comparative advantage in these products, cannot afford to subsidize their agriculture sector and face prohibitive tariffs for their products abroad. The powerful agriculture lobby groups, particularly in the large developed countries, make reform politically difficult.

This is as true of the United States as it is for that other bogey-man of agricultural trade, the European Union. The U.S. government subsidizes certain farm commodities through direct price supports and tariff rate quotas that limit imports. Americans pay a high price for this ongoing government intervention in agricultural markets: in 2004, U.S. farm programs transferred $16.2 billion from U.S. food consumers to producers.

Congress should seize the opportunity presented by the drafting of a new farm bill in 2007 to fundamentally reshape U.S. agricultural policy in a more market-friendly direction. A farm bill with deep cuts in subsidies and trade barriers would save U.S. taxpayers and consumers tens of billions of dollars during the next decade, would yield environmental benefits by reducing over-production, and stimulate innovation and productivity on farms. Cutting subsidies and trade barriers would also raise incomes of farmers in poorer countries and reduce global poverty, contributing to a more hospitable climate abroad for U.S. foreign policy.

The LATEST from the Center for Trade Policy Studies on Agriculture

• Plenty of Blame to Go Around on Farm Bill Travesty (May 23, 2008)

• Congress' Compromise on Farm Bill Falls Short (February 26, 2008)

• Free Trade Bulletin no. 31: Food Fight (January 30, 2008)

• The Madness of American Milk Prices (July 6, 2007)

• Ten Reasons to Cut Farm Subsidies (June 28, 2007)

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