Question

Essay Question:

Explain how agricultural subsidies and protections are not only disruptive to global trade but detrimental for economic growth in most developing countries.

Answer 1

A common barrier to trade is government subsidy. Subsidies make goods cheaper to produce than in foreign markets.This results in lower domestic price which raises the price of foreign goods relative to domestic which reduces imports.

Agriculture subsidies are part of support measures which government uses to pursue ends without direct transfer of resources from government to beneficiaries. other form of support involves transfer of resources from buyers to sellers as a result of price changes caused by regulations or market interventions. Prices may be raised by imports restrictions or exports promotion.

These subsidies often attack as causing excess production and reduced global prices which reduces incentive to agriculture production in non subsidizing countries also undermining poor producer income.

When it comes to developing countries agriculture subsidy affecy national security, food security and poverty which suddenly end up in lowering the GDP of a country. Effects of poverty on growth are negative this will have indirect impact on reducing the income available to invest in rural infrastructure such as health, safe water supplies and electricity for rural poor