NCPA - National Center for Policy Analysis

How U.S. Agricultural Policy Hurts the Developing World

July 25, 2011

The United States is a major producer, exporter and importer of agricultural commodities, and U.S. supplies and demands affect global markets.  Therefore, pervasive policy surrounding U.S. agriculture has the potential to influence outcomes globally for those who demand and supply agricultural products.  Many of those affected by U.S. trade and domestic agricultural policies are among the poorest people on the planet.  In many ways, U.S. agricultural policy is harmful to the global poor, says Daniel A. Sumner, the director of the University of California Agricultural Issues Center and a professor at the University of California, Davis.

  • Farm-commodity and related subsidies reduce world prices, especially when prices are already low.
  • Ethanol and related demand-side policies raise world prices, especially when prices are already high.
  • Global prices thus vary as a consequence of U.S. policies that sometimes have larger effects on production and sometimes on demand.
  • In addition, U.S. agricultural policies (including trade policies) also make international agreements on reductions in trade barriers more difficult to finalize, further increasing price volatility and postponing the economic benefits of freer trade.

U.S. policies that thwart the implementation of global trade agreements -- as well as the perception that the United States does not honor agreements it signs -- tend to make other countries less willing to negotiate with the United States, further limiting gains from trade for the poor, says Sumner.

Source: Daniel A. Sumner, "How U.S. Agricultural Policy Hurts the Developing World," American Enterprise Institute, July 2011.

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