Agricultural export subsidies are one of the most distorting of the numerous distortions affecting agricultural trade, and the reluctance of users to make clear commitments for their
elimination was a key factor contributing to the deadlock of the WTO negotiations on agriculture. In August 2004 the WTO General Council decided to eliminate export subsidies by a specific yet
undetermined date. Export subsidies amount to around ＄6 billion each year, depending on world price movements. Some countries pay export subsidies in order to dispose of their surplus
agricultural production on world markets. These payments impose substantial costs on taxpayers in the subsidizing countries and reduce the world prices of several temperate and competing
products to the detriment of producers in developing and least developed countries. However, they also benefit consumers in food-importing countries, many of which are developing. Quantitative
analysis using the UNCTAD/FAO ATPSM model suggests that the removal of export subsidies would raise world prices. The major beneficiaries would be EU taxpayers and developing country producers.
Since consumers in developing countries probably face higher prices the welfare effects are ambiguous, but most likely only during an initial period until domestic supply capacities can catch
up in many of these developing countries. This is because many of them are net importers of wheat, dairy products and beef, and the cheap subsidies imports hinder the production of these
products and of substitutes. Although the benefits to some of preferential access to the EU sugar market would also likely be reduced if export subsidy reform led to the reduction of EU
domestic sugar prices, increasing world market prices are likely to more than offset the losses. The analysis also points to diverse results regarding specific products for producers and
consumers in most countries. This suggests that while longer-term reforms of export subsidies are desirable, the immediate removal of export subsidies islikely to cause some hardships for some
developing country consumers, which will need to be addressed with appropriate support mechanisms.--Publisher's description.
