What do you think would help the citizens of the world’s poorest nations more, increasing foreign aid or removing all agricultural tariffs and subsidies?

It is our view that there is not one simple answer to this complex issue. Certainly, if the richest countries in the world removed all tariffs and subsidies it would provide an immediate benefit to the world’s poorest nations, but this would also have a huge negative impact on farmers in world’s wealthy nations, which makes it an impractical solution. On the other hand, simply increasing foreign aid comes with its own set of challenges, such as creating an overdependence on wealthy nations and encouraging poor nations to be less self-sufficient. The solution to this problem must be achieved by striking a balance between the amount of foreign aid given to poor nations and the tariffs and subsidies that are given to support the farmers of wealthy nations. For example, the subsidies being provided to US cotton farmers are believed to be depressing the world cotton prices by as much as 50 percent. We believe that a well planned, gradual move towards a subsidy level that reduces the depressed cotton prices by only 20 percent (versus the current 50 percent) would help to achieve a better balance, providing countries such as Brazil an opportunity to compete for its share of the world’s cotton market. If the wealthiest countries in the world would work together to strike a balance in each of the major agricultural areas, it would allow the world’s poorest nations the opportunity to better compete in the world market, and the result would lead to more self sufficient nations and less need for foreign aid.

Why do you think governments in developed nations continue to lavish extensive support on agricultural producers, even though those producers constitute a very small segment of the population?

We believe there two primary reasons that governments in developed nations provide expensive support to their domestic farmers. As referenced in the case, the primary reason is politically based. For example, farmers in the US tend to be very politically active, so American politicians naturally want to provide them with support in hopes of capturing there political support. Next, it appears obvious that the world political landscape is also greatly impacted by these subsidies and tariffs. For example, the US government maintains a tremendous amount of leverage over other countries by using its financial strength to subsidize US farmers. The result is a dramatic increase in US exports, and a lot of bargaining power with the rest of the world. Note the challenges that Brazil is having with the US as it relates to world Cotton market. It certainly appears obvious that this practice is mostly, if not entirely politically motivated.