Reform Farm Policy and Save $120 Billion

Australian research report finds that making farm programs more market-oriented could increase gross incomes by $7 billion while maintaining budget savings.

Published on: Sep 15, 2006

Farm policy reform in the United States, complemented by more market-oriented multilateral trade reform, could potentially lead to over a $100 billion in budget savings while still adding to overall gross incomes, reveals a new report released by Australian Bureau of Agricultural & Resource Economics.

Potential U.S. budget savings are estimated to be around $120 billion (in 2005 dollars) over the period 2007-2020 relative to what would otherwise be the case were existing farm policies to be maintained. The estimated net present value of the change in U.S. agricultural gross incomes, during the same period, would be an increase of $7 billion (in 2005 dollars), relative to what would otherwise be the case.

The report found that agricultural industries in the United States that are not recipients of current farm program support would be the major beneficiaries of U.S. farm policy reform.

The report states if U.S. farm support reform was complemented by more market-oriented multilateral agricultural trade reform, than the production of wheat, beef and fruit and vegetables would expand in the medium to long-term, relative to what would otherwise have been the case. "On the other hand, highly supported industries, such as sugar and cotton, are likely to contract in the medium to long-term, relative to what would otherwise have occurred," ABARE executive director Brian Fisher writes.

Australia and New Zealand don't subsidize agriculture and have been critical of U.S. subsidy levels - including export credits and farm support payments.

Read the full report, U.S. Agriculture without Farm Support.