Are Farm Subsidies Worth the Doha Failure
Bob Thompson and Anita Regmi
High Income Country Distortions in Agricultural Markets
• Three basic forms
– Import tariffs & export subsidies
• Modeled in GTAP-AGR as wedge between world price and
domestic price
– Support linked to the volume of production of specific
commodities (“amber box” support)
• Modeled in GTAP-AGR as augmentation of product price
– Support not linked to production of specific commodities
(“green box” support or “decoupled” income transfers)
• Modeled in GTAP-AGR as land input subsidy
U.S. Agricultural Interventions
(Base Year 2001)
Product rTO rTMS rTXS rTF-land
Grains 8 0-4 0 -66
Oilseeds 29 0-14 0 -12
Cotton 28 0-2 0 -27
OthCrops 4 0-7 0 -21
Livestock 1 0-1 0 -12
Dairy 0 2-29 8 0
Sugar 0 5-50 0 0
OthFood 0 1-4 0 0
Gains From Unilateral US Liberalization
EV estimations from Unilateral US Liberalization
Doha Full lib Full Lib Global
Unilateral GB ‘in’ GD ‘out’ "Full"
US 1552 1552 2090 3816
Allocative efficiency
EU25 -544 -544 -548 4737
accounts for most gains
Japan -668 -668 -831 4775
4000
China -554 -554 -263 1186 3500
Brazil 498 498 460 3074 3000
2500
EV
2000
1500
1000
500
0
Greenbox ‘in’ Greenbox ‘out’ "Full"
Changes in US Exports from
Unilateral Trade Liberalization
US Mkt Unilateral Global
Share GB No GB Ag Lib
Grains 3.48 -224 -382 -366
Oilseeds 3.73 -523 -472 -390
Cotton 2.80 -652 -635 -571
Other Crops 1.45 -97 -14 34
Livestock 2.25 -119 -97 -22
Dairy 0.58 -511 -504 109
Sugar 0.77 11 21 -26
Other Food 1.64 -10 -6 191
Mnfcs 1.70 16 15 6
Svces 2.19 10 9 8
Total 20.59 -2100 -2063 -1027
Change in U.S. and World Price Ratio
[pms(i,r,s) - ams(i,r,s) - pim(i,s)]
US Mkt Unilateral Global
Share GB No GB Ag Lib
Grains 3.48 39 76 119
Oilseeds 3.73 157 135 115
Cotton 2.80 218 208 176
Other Crops 1.45 22 4 5
Livestock 2.25 30 24 15
Dairy 0.58 101 99 21
Sugar 0.77 10 8 57
Other Food 1.64 3 3 -8
Av. Ag 73 70 63
Mnfcs 1.70 -2 -2 0
Svces 2.19 -2 -2 1
Effects of Scenarios on World Commodity Prices
All All US US
Doha Amber A+G Amber A+G
Grains -0.2 +1.3 +2.4 +1.5 +2.1
Oilsee +1.9 +9.2 +9.0 +5.3 +4.8
Cotton +1.6 +6.7 +6.6 +5.4 +5.2
O Crop -0.1 +0.8 +0.1 +1.1 +1.0
Lvstk +0.1 +1.4 +2.5 +1.4 +1.3
Dairy +3.7 +3.9 +4.5 +2.7 +2.7
Sugar +0.3 +0.3 +0.3 +0.7 +0.2
O Food -0.1 -0.5 -0.3 +0.5 +0.6
Farm Household Income Changes
5
Off-farm Income
Real HH Income On-farm Income
0
-5
-10
farm share GBin GBout Full
hh income
-15
USA 8.0%
EU25 60.0%
-20 JPN 15.0%
China 95.0%
Brazil 95.0%
-25
Impact of Alternative Scenarios
on US Farm Land Prices
• Scenarios
– Doha - 6%
– All High Income Countries
• Eliminate Amber -19%
• Eliminate All Distortions -46%
– U.S. Only
• Eliminate Amber -13%
• Eliminate All Distortions -44%
• What would a buyout cost? Under full unilateral ag liberalization,
annual returns to land in U.S. fall by $18.6 billion. At a 10%
discount rate, to buy out U.S. farm land owners’ capital losses
would cost $186 billion or about the total budget cost of U.S.
farm programs over 9 years.