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What Would Help The Citizens Of The Poorest Nations More, Increasing Foreign Aid Or Removing All Agricultural Tariffs And Subsidies?'

2967 words - 12 pages

There have long been two opposing arguments in regards to what would help the citizens of the poorest nations more the first being to increase foreign aid and the second, to remove all agricultural tariffs and subsidies. The main problem surrounding subsidies is it allows first world exporters to drastically reduce the prices of their goods and, thus have a commercial advantage over the farmers of poorer nations. The question remains would it in fact benefit the developing world greater to remove subsidies and tariffs on agricultural products or, simply increase foreign aid to these poorer nations? It is an important issue as it concerns many factors including fundamental morals, world ...view middle of the document...

The main problem surrounding subsidies is it allows these first world exporters to drastically reduce the prices of their goods. Last year it was reported by Oxfam international that President Bush signed a new farm bill worth $180 billion that will raise U.S. agricultural subsidies up to 80 percent a year for the next 10 years. What this $180 million does is enables farmers to exports their agriculture for far less than the actual cost of production. To be exact last year US farmers were able to sell corn at prices 20 percent below the cost of actual production, and wheat at 46 percent below the actual cost of production (Maza, 2006). As first world farmers are able to sell at prices far less than the cost of production it encourages excess supply, which further lowers world agricultural prices reducing the money that poor farmers make, or pushing them out of the business entirely (Borrow, 2005). Although, there are antidumping policies in place these tend to not be able to offer much assistance (Dunn, 1996). Under the WTO Agreement, dumping is condemned (but is not prohibited) if it causes or threatens to cause material injury to a domestic industry in the importing country then remedy action may be taken(WTO). This simply leaves growers in the developing world unable to compete and very little ability to act against larger first world countries. Subsidies to farmers in the first world may well be very helpful and it is stated that subsidies accrue to domestic producers, whose international competitiveness is increased as a result of them (Hill, 2005). However, these subsidies have extremely negative and harmful ramifications to farmers in the developing world (Van den Bossche, 2005).Secondly, Tariffs on the other hand are a tax levied on imports (Hill, 2005). Tariffs have also been a great barrier to agricultural trade with poor countries although tariff rates have, on average, generally been reduced, high duties continues to be placed on certain products by wealthy nations in order to protect domestic producers. Statistics detailed by the World Trade Organisation show that on average tariffs on agricultural products are more than three times higher than those on non-agricultural goods for example 77-146% on beef into the EU, around 170% on sugar into the EU, around 180% on raw sugar into the US, over 700% on rice into Japan, 356% on honey into Korea. This proves extremely costly to poor countries. Tariffs known as Ad valorem tariffs are levied as a proportion of the value of the imported good. For example the European Union has imposed such a tariff on imports of bananas from Latin America the tariff amounts to 15 to 20 percent by value on the first 2.5million tons of imported bananas (Hill, 2005). Tariffs affect the poor countries just as significantly as subsidies. The U.S. often collects more in tariffs on goods from poor countries than from rich countries, even though it imported a much higher value of goods from rich countries. In...

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