NCPA - National Center for Policy Analysis

How U.S. Agricultural Subsidies Harm the Environment, Taxpayers and the Poor

August 7, 2013

Proponents of agricultural subsidies often justify them as necessary to compete in international agricultural markets and ensure a variety of plentiful, inexpensive food for domestic consumers. The federal government offers a wide range of aid to farmers, including: price supports and price floor programs; crop insurance -- against both lost crops and lower than expected prices; government purchases of excess food stocks; and promotion of domestic crops through international trade agreements, says Marcelo Ostria, a research associate with the National Center for Policy Analysis.

These agricultural subsidies distort trade, which adversely affects poor farmers and environmental protection in developing countries. Subsidies also impose a fiscal burden on taxpayers. Conversely, reducing agricultural subsidies in the United States (and other developed countries) could help poor farmers in developing countries compete in the marketplace, reduce ecosystem degradation and help reduce federal spending. 

Subsidies lead to overproduction of certain crops in developed countries, causing prices to fall, sometimes below the cost of production.

  • Oxfam International notes that the more than 10 million people in Central and Western African countries who rely on the production and sale of cotton lose up to $250 million every year due to subsidies.
  • According to the Congressional Research Service, the United States spent about $24 billion on cotton subsidies over the past 10 years.

Subsidies also invite retaliation under World Trade Organization (WTO) rules. In 2009, a WTO arbitration panel granted Brazil the authority to collect $147.3 million damages, to impose punitive tariffs, and to lift patent protections on $829 million worth of U.S. goods.

Overproduction caused by subsidies also results in unintended environmental harms. In pursuit of subsidies, farmers often cultivate marginal farmland, where the thin soil is unable to replace depleted nutrients.

Agricultural subsidies distort market prices and interfere with trade, causing deleterious distortions that adversely affect poor farmers in developing countries and burden U.S. taxpayers. Moreover, in some cases agricultural subsidies can lead to environmental degradation. Reducing agricultural subsidies has the potential to help developing countries, the environment and taxpayers.

Source: Marcelo Ostria, "How U.S. Agricultural Subsidies Harm the Environment, Taxpayers and the Poor," National Center for Policy Analysis, August 2013.


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