NCPA - National Center for Policy Analysis


November 29, 2006

The United States and many other countries -- including all major developed countries and most developing countries -- would benefit economically from reductions in agricultural tariffs and subsidies worldwide, says the Congressional Budget Office (CBO).


  • If all policies worldwide that distort agricultural trade were phased out in this decade, the likely total annual economic benefit to the world by 2015 would be roughly $50 billion to $185 billion.
  • Those estimates account for only the efficiency gains and increased investment resulting from liberalization.
  • In studies that also incorporate effects on productivity growth rates, the benefits are 50 percent to more than 100 percent larger.

The U.S. agricultural industry, given its comparably modest tariff and export subsidy rates and somewhat higher domestic subsidies, stands to benefit more from liberalization in terms of increased exports than it has to lose in terms of increased imports. 

However, for both the United States and other countries, even relatively modest exceptions and special preferences could substantially reduce the benefits that would otherwise be realized, says the CBO:

  • Allowing developed countries to designate as few as 2 percent of their tariff lines for protecting sensitive products and developing countries to designate an additional 2 percent, could eliminate 80 percent of the economic gain.
  • Also, allowing special and differential treatment to developing countries -- whereby their required cuts in tariffs and subsidies are smaller than developed countries -- could reduce the estimated benefits of liberalization by 64 percent. 

Source: "Agricultural Trade Liberalization," Congressional Budget Office, November 20, 2006.


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