The Relative Importance of Global Agricultural Subsidies and Market Access

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, the authors first compare the OECD and model-based estimates of the extent of the producer distortions (leaving aside consumer distortions), and show 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. Then the authors 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.

Bibliographic Details

Main Authors:	Valenzuela, Ernesto, Anderson, Kym, Martin, Will
Language:	English
Published:	World Bank, Washington, DC 2006-04
Subjects:	AD VALOREM, AGGREGATE SUPPLY, AGREEMENT ON AGRICULTURE, AGRICULTURAL INCOMES, AGRICULTURAL MARKETS, AGRICULTURAL NEGOTIATIONS, AGRICULTURAL OUTPUT, AGRICULTURAL POLICIES, AGRICULTURAL PRODUCT, AGRICULTURAL PRODUCTION, AGRICULTURAL PRODUCTS, AGRICULTURAL SECTOR, AGRICULTURAL SUBSIDIES, AGRICULTURAL SUBSIDY, AGRICULTURAL SUPPORT, AGRICULTURAL TRADE, AGRICULTURE, ANALYSIS OF VARIANCE, APPLIED TARIFF, ASSISTANCE, AVERAGE TARIFF, BORDER MEASURES, BORDER PRICE, BORDER PROTECTION, CONSUMER PRICES, CONSUMERS, DEMAND CURVE, DEMAND ELASTICITIES, DEMAND ELASTICITY, DOMESTIC DEMAND, DOMESTIC MARKET, DOMESTIC PRICES, DOMESTIC PRODUCTION, DOMESTIC PRODUCTION SUBSIDIES, DOMESTIC SUBSIDIES, DOMESTIC SUPPORT, ECONOMIC MODELS, ECONOMIC POLICY, ECONOMIC RESEARCH, ECONOMIC WELFARE, ELASTICITY, ELASTICITY OF DEMAND, EUROPEAN UNION, EXPORT, EXPORT MARKET, EXPORT SUBSIDIES, EXPORT SUBSIDY, EXPORTS, GENERAL EQUILIBRIUM MODELING, GLOBAL ECONOMY, GLOBAL LEVEL, GLOBAL TRADE, GLOBAL TRADE ANALYSIS, GLOBAL WELFARE, GOVERNMENT SUBSIDIES, GROSS VALUE, IMPORT BARRIERS, IMPORT RESTRICTIONS, IMPORT TARIFF, IMPORT TARIFFS, IMPORTED GOODS, IMPORTING COUNTRY, INCOME, INFLATION, INTERMEDIATE INPUTS, INTERNATIONAL TRADE, MARKET ACCESS, MARKET PRICE, MARKET PRICES, MERCHANDISE, MERCHANDISE TRADE, MULTILATERAL TRADE, NOMINAL PROTECTION RATE, NON-TARIFF BARRIERS, POLICY RESEARCH, PRICE COMPARISON, PRICE COMPARISONS, PRICE EFFECT, PRICE SUPPORT, PRICE SUPPORTS, PRIMARY FACTORS, PRIMARY FACTORS OF PRODUCTION, PRODUCER PRICES, PROTECTION RATES, RATES OF PROTECTION, REDUCTION COMMITMENTS, SUPPLY ELASTICITY, TARIFF BARRIERS, TARIFF EQUIVALENT, TARIFF PROTECTION, TARIFF RATE, TARIFF RATES, TAXPAYERS, TECHNICAL BARRIERS, TOTAL COSTS, TRADE, TRADE BARRIERS, TRADE LIBERALIZATION, TRADE MEASURES, TRADE NEGOTIATIONS, TRADE NEGOTIATORS, TRADE POLICY, TRADE REFORM, TRADE RESTRICTION, URUGUAY ROUND, VALUE ADDED, VALUE OF IMPORTS, VALUE OF OUTPUT, WELFARE IMPACTS, WELFARE LOSSES, WORLD TRADE, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2006/04/6737279/relative-importance-global-agricultural-subsidies-market-access https://hdl.handle.net/10986/8700
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