However, the commitment of both the U. S. and its trading partners under the WTO agreements to freer trade in agriculture does not appear as robust as in some other sectors. The Uruguay Round agreement required from WTO members to reduce state aid (subsidies) substantially, for agriculture in particular. This subsidizing usually is justified by the need to stabilize or preserve an industry, but in fact it distorts competition (Fischer 211). But agricultural trade disagreements and retaliatory trade practices still occur, even within the WTO framework (Green 822).
Also, to the extent that former agricultural commodity policies and programs in the U. S. guaranteed minimum prices, set target prices, stimulated U. S. exports, or insulated U. S. markets from international competition, there are some decreases in the prices of agricultural products and increases in the price volatility of those commodities (Harrington et al. 58). The amount of government assistance and support to the agricultural sector has been declining from peak levels during the farm financial crisis of the mid-1980s and the drought conditions of the early 1990s.
With the passage of the Federal Agricultural Improvement and Reform Act of 1996, the role of government in the agricultural sector has changed dramatically (Thomson 263). The increased flexibility of planting and the reduction of direct support imply that farmers are now much more dependent on the market, and that significant market expansion should replace the transfer payments scheduled to end in 2002 under WTO Agreement on Agriculture (Fischer 203).
In addition to direct payments, interventions in markets for dairy products, sugar, and peanuts supported prices through direct purchases (dairy products), production quotas and administered prices (peanuts), and tariffs, import quotas, and non-recourse loans (sugar). Earlier funding for the U. S. Export Enhancement Program (EEP) has varied between $0. 3 and $1. 2 billion. The 1996 Act and the Uruguay Round agreement have reduced the maximum expenditures under EEP to $400 million (Green 820).
However, if international markets turn unfavorable, the authority for EEP assistance is very limited, and strong trade interventions to protect or restore the U. S. markets may be illegal under WTO rules. Nonetheless, producers of formerly supported commodities may use forward contracting or futures and options markets more extensively to manage these price risks (Furtan & Baylis 302). Another example is an output tax aimed at reducing pesticide runoff. The tax would induce a farmer to reduce output, but the tax would not necessarily lead the farmer to change behavior with respect to the application of the pesticide (Michelmann et al. 318).
The implications discussed above prove that the WTO Agreement on Agriculture produced significant improvements in market access for the U. S. agricultural products and induced farmers to employ rather market-oriented strategy than to rely on governmental agricultural policy. Conclusion The United States entered into the WTO Agreement on Agriculture in hope for improved access to international markets and increased effective demand for the U. S. agricultural products.
After a lapse of decade since adoption of this agreement it is obvious that it brought many advantages to the U. S. farming, but also some obstructions. The reductions in tariff barriers have generated, and will continue to generate an increase in world trade in agricultural products, thus, increasing the volume of U. S. agricultural exports in this sector. At the same time this reduction exposed that many non-tariff barriers remain such as SPS measures. Nevertheless, the WTO Agreement on Agriculture brought important market-opening reforms in several major world markets which benefited the U. S.
agricultural producers. This is proved by the U. S. Department of Agriculture declaring the current and potential gains for U. S. agriculture from world trade liberalization. The future course of the U. S. agricultural sector depends on balancing growth of markets and growth of agricultural production capacity, which in turn influences the level and composition of income, asset values, and farm numbers. Further effort needs to be made to reduce the still very high level of tariffs. The U. S.
agricultural sector is moving towards new forms of trade based around high value products and away from bulk homogenous products. These processes cement the implementation of the WTO Agreement on Agriculture as increasingly market-oriented policy at the domestic level.
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