Trade Policy Analysis No. 30

Ripe for Reform: Six Good Reasons to Reduce U.S. Farm Subsidies and Trade Barriers

U.S. agricultural policies have remained fundamentally unchanged since the 1930s. Today the U.S. government continues to subsidize certain farm commodities through direct price supports and tariff rate quotas that limit imports. Americans pay a high price for this ongoing government intervention in agricultural markets.

Reducing farm subsidies and trade barriers would benefit Americans in six important ways. One, reform would deliver lower food prices to tens of millions of American households, especially lowincome families that spend a large share of their income on food. Last year U.S. farm programs transferred $16.2 billion from U.S. food consumers to producers.

Two, reform would lower costs for U.S. industries, such as confectioners and other food processors, that use agricultural commodities in their final products and would promote trade negotiations to open markets abroad for U.S. exporters.

Three, reducing farm subsidies would save U.S. taxpayers tens of billions of dollars during the next decade. Many of those subsidy payments currently go to large farms and agribusinesses, not to smaller “family farms.”

Four, agricultural reform would enhance the environment by reducing the amount of top soil lost and damaging fertilizers and pesticides used by American farmers. It would liberate farmland to be used for reforestation, recreation, and other more environmentally friendly purposes.

Five, agricultural reform would benefit farmers themselves by promoting production of crops that are in demand by consumers. Farm reform would stimulate innovation and productivity gains on the farm and promote more economic diversity and dynamism in rural communities.

Six, lower farm trade barriers would raise incomes of farmers in poor countries, reduce global poverty, create a more hospitable climate abroad for U.S. foreign policy, and enhance U.S. security.

Congress and the president should seize the opportunity presented by the Doha Round negotiations of the World Trade Organization and the next reauthorization of the farm bill to fundamentally reform U.S. agricultural policy.

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Daniel Griswold is director of the Center for Trade Policy Studies, Stephen Slivinski is director of budget studies, and Christopher Preble is director of foreign policy studies at the Cato Institute.