Agricultural Subsidy Essay

Words: 3037
Pages: 13

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…
Therefore, assuming another country has the comparative advantage, i.e. developing countries, developed countries will lose out. Agricultural tariffs have benefitted European farmers as they have been protected from cheaper competition. However, it is argued that the restriction of competition encourages inefficient firms. Therefore, in the long run, domestic firms may not make the necessary improvements that they would have done without tariffs.
Also the introduction of tariffs usually leads to retaliation. Therefore, other countries will place tariffs on EU exports. Therefore, some exporting firms will lose out and sell less exports. If these tariffs are removed, there will be greater levels of exporting. Critics argue that lowering prices from the use of subsidies create unhealthy incentives for consumers. In the USA, cane sugar has been replaced with the cheaper alternative of corn syrup, making high-sugar food cheaper; beet and cane sugar are subject to subsidies, price controls, and import tariffs that distort the prices of these products as well. “Market distortions due to subsidies have led to an increase in corn fed cattle rather than grass fed. Corn fed cattle require more antibiotics and their beef has a higher fat content”, this can make the average consumer less healthy, which is not economically viable. (Kummer, Corby. "Back To Grass" The Atlantic.