The Effect of Agricultural Subsidies in Argentina

Economic globalization refers to the process of eliminating or reducing trade restrictions between nations and the liberalization of the global marketplace. In theory, free trade among countries is positive, but, in practice, policy prescriptions from organizations like the IMF and the World Bank have caused serious negative consequences. One such criticism, and the focus of this paper, is the issue of agricultural subsidies (or farm subsidies), which give government-backed financial assistance to farmers and agricultural businesses in order to supplement the income of farmers, influence the cost and supply of agricultural goods and generally improve the agricultural sector of the country’s domestic economy. This paper argues that while globalization has the potential to improve the economic future of all countries, unfair policies like agricultural subsidies are standing in the way. Specifically, this paper will analyze the relationship between farm subsidies, globalization, and developing countries by looking at two case studies: the corn subsidies in Mexico and the cotton subsidies in West Africa.

Although the governments of developed countries like the United States have promoted trade liberalization, they have also created barriers in the markets where developing countries have a comparative advantage (specifically the agricultural sector). These poor countries rely on the export of agricultural goods for economic growth but agricultural subsidies (that, one should note, only wealthy countries can afford) often lead to a surplus of the subsidized crop, which results in the crop being sold cheaply in the global market and therefore driving down its world price. In combination with the globalization policies that have been imposed by the International Monetary Fund these subsidies make it impossible for unsubsidized crops to compete with the artificial low price of subsidized crops in both the global and domestic markets. Thus, local farmers find themselves with severely lowered wages or are forced out of the marketplace/production entirely. Needless to say, the economic self-sufficiency of developing countries is lacking, if it exists at all. As one author wrote: “Research has shown that the rich countries' agricultural subsidies of about $300 billion a year reduce world prices, which consequently undermines developing countries exports…The combined effect of subsidies in developed countries along with imposed liberalization of their markets in developing countries can be devastating” Indeed, the numbers reveal just how devastating it has been. According to Mark Malloch Brown, former head of the United Nations Development