farm operators receive no farm program benefits because they do not grow “program
crops”. Shucksmith, Thomson and Roberts (2005) show that the richer core regions of
Europe receive most of the agricultural support within the common agricultural policy.
The persistence of trade policy interventions suggests that policymakers may be
responding to the constituents whom they serve with little regard for sound economic
policy. Diamond and Mirrlees (1971) show that such intervention is a largely inefficient
means of achieving income redistribution. Dixit (1985) also shows that the use of trade
policy to redistribute income is suboptimal. Ederington and Minier (2005) suggest that
trade barriers exist because they benefit politically influential groups who are able to
lobby successfully for them.
The agricultural community and the farm organizations that represent them in
developed countries is one such influential group. That community is often the largest
recipient of government outlays in developed countries. Farm operators in the U.S.,
Europe and other wealthy nations receive about $300 billion in annual farm subsidies.
These subsidies are proving a major stumbling block in on-going agricultural
negotiations such as the WTO ministerial meetings in Hong Kong in December 2005.
Developing countries argue that such subsidies are depressing world prices for the
commodities in which they have a comparative advantage. For example, U.S. cotton
subsidies total approximately $3 billion annually. The cotton subsidy has helped the U.S.
become the world’s second largest producer of cotton, after China, and its largest
exporter. Approximately 70% of the four million tons of cotton grown in the U.S. each
year is sold abroad. The U.S. would produce about 30 percent less cotton, and cotton
exports would shrink by around 41 percent in volume in the absence of these subsidies