Agricultural Economic Report No. 802.

Agricultural trade barriers and producer subsidies inflict real costs, both on the coun-tries that use these policies and on their trade partners. Trade barriers lower demand for trade partners ’ products, domestic subsidies can induce an oversupply of agricul-tural products which depresses world prices, and export subsidies create increased competition for producers in other countries. Eliminating global agricultural policy distortions would result in an annual world welfare gain of $56 billion. High protec-tion for agricultural commodities in the form of tariffs continues to be the major factor restricting world trade. In 2000, World Trade Organization (WTO) members continued global negotiations on agricultural policy reform. To help policymakers and others realize what is at stake in the global agricultural negotiations, this report quantifies the costs of global agricultural distortions and the potential benefits of their full elimina-tion. It also analyzes the effects on U.S. and world agriculture if only partial reform is achieved in liberalizing tariffs, tariff-rate quotas (limits on imported goods), domestic support, and export subsidies