Sunday, June 8, 2008

Farm Programs and the Poor in LDCs

Last week there was a good article on farm programs and their focus as part of the Doha Round. I think it's an interesting question – The farm programs are bad, but mainly from the standpoint (in LDCs) that they are second-best solutions to their hunger problems. Export controls, etc. do lower the domestic price and may lead to more affordable staples for the world's poorest, BUT they are by far the second-best way to go about helping those who are hungry and in poverty. In addition to the usual reduction in output and economic distortions, these programs sometimes lead to producers in these countries hoarding of crops to try to hold out against the government and pressure for assistance, as has been the case in Thailand. Therefore the trade negotiations tread a fine line: Removing the trade restrictions is good on average, but doing so without replacing the trade controls with more sensible and direct ways of helping the hungry and poor could hijack what small measure of political support for trade liberalization we may have built over the last 20 years.

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