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Transactions and imperfect information

Poorer Countries should take advantage of Farm Subsidies by Rich Nations

Latest news from WTO negotiation Third-world countries always protest against huge agricultural subsidies given by rich nations like US, Europe etc. They charge that subsidies are causing prices of farm products to drop, causing farmers in poorer countries to loose their livelihood. Without a hint of irony they cite these subisidies as example of exploitation by rich countries! These countries then go about erecting trade barriers against agricultural imports in the name of protecting their farmers. Given the fact that people in the poor countries are dying of hunger and malnourishment these protests against "cheap" imports do not make any sense.

Since, farm subsidies make farm products cheaper, poorer countries should welcome them. Poor countries should remove all import barriers against subsidized farm products without waiting for WTO negotiations. Subsidized farm products will reduce poverty and malnourishment and thus they should thank rich countries for the subsidies as they represent net transfer of wealth from tax payers in rich country to the poorest people in poorer countries.

Apart from solving the problem of poverty this will help poorer countries in other ways. Since, rich countries have already spent money on subsidies, less money is available for investment in producing other products. Increased demand for other products because of savings from food and freeing of resources employed earlier in production of subsidized farm goods should make it easy for poorer countries to develop competitive advantage in production of other products.

In short term farmers in the poorer countries will face losses as they have to discontinue production of subsidized farm goods. However, in poorer countries agricultural production is still done mostly manually. Thus, there is little capital investment to really go waste. Land can always be utilized for other purposes without loosing much invested value. Labourer in poorer countries are also unskilled as thus the transition represents a great opportunity to invest in developing alternate skills.

Developing countries cannot use excuse of farm subsidies to erect import barriers. That will not be retialiation against rich countries but actually against consumers in developing countries.

This is not to argue against free trade itself. I am against using one injustice to perpetuate another injustice against a third party (consumers in developing countries). And the point is that countries benefit by unilaterally dismanting trade barriers irrespective of behavior of other countries.

Comments

neonirvana

Please enlighten me as to how are the farmers in the poorer countries supposed to earn income to buy this cheap subsidised food from the philanthropic richer countries.Agriculture is their only source of income and it is the only industry where they have any comparative advantage.It is only natural that rich countries focus on producing industrial goods which require massive capital investment and give the people in poor countries a chance to earn their livelihood.

Jawahar Mundlapati

Can you please tell me why the developing nations
are not regulating agricultural imports by imposing tariffs.

I think they can protect their domestic agriculture sector with this.

Please correct me if I'm missing anything here.

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