Analysis Of The Effects Of Agricultural Subsidies

On May 13,2002, the president of United States, Bush, signed a new agricultural law, which was named "The Farm Security and Rural Investment Act of 2002(2002 Farm Act)". The new legislation governs agricultural programs through 2007,but the budget framework extends over 10 years. While the 2002 Farm Act introduces some new policies to the array of agricultural commodity programs, in many ways, it extends provisions of the 1996 Farm Act and the ad hoc emergency spending bills of 1998-2001. For example, the 2002 Act continues marketing assistance loans; direct payments replace production flexibility contract payments of the 1996 Farm Act; and counter-cyclical payments are intended to institutionalize the market loss assistance payments of the past several years. In a word, the core content of 2002 Farm Act is to increase agricultural subsidies and build a safe net for farmer's income.The content of this thesis is including: simply assaying the concept, theory and economic efficiency of agricultural subsidies; illustrating the history of USA's agricultural legislations; explicating the basic content of 2002 Farm Act, especially the new items of agricultural commodity programs; investigating the functional principle of each subsidy item; deducing the probable effects of three central subsidy means2 through qualitative arguments. Through quantitatively comparing the effect of 2002 Farm Act and the effect of continuing 1996 Farm Act, this thesis figures out what kind of impacts 2002 Farm Act affects the USA's agriculture in the future 10 years.Finally, this thesis studies the impacts of 2002 Farm Act to the whole world and China. The conclusion is that 2002 Farm Act changed the "green box" payments into "yellow box" payments, directly affected the agricultural production, distorted the agricultural commodity prices and international trade, and furthermore, transgressed the "free trade and equitable competition" spirit of World Trade Organization. There is no doubt that the American agricultural commodities with subsidies make an unfair competition with Chinese agricultural commodities without subsidies in international trade. Therefore, the writer thinks that Chinese government should learn from the agricultural policies of American, adjust its domestic agricultural policies, in order to increase farmer's income, enhance the competitiveness of its agricultural commodities and undertake the security of national provisions.