The members of the World Trade Organization are currently negotiating a new
agricultural agreement. If the new agreement includes rules to decrease agricultural subsidies,
world prices of cereals are likely to rise. Such a change would benefit farmers but hurt
consumers of cereals. This paper uses two methods to examine the effect on cereals markets in
Africa if the new WTO agricultural agreement requires developed countries to significantly
reduce their domestic supports to agriculture.
Currently, developed countries heavily subsidize their agricultural sectors. In particular,
large subsidies allow countries such as the United States, the European Union and the United
Kingdom to export cereals at prices that are below the cost of production, which depresses the
international prices of these products. Some argue that because the majority of the world’s poor
are farmers, developed countries’ grain subsidies have a negative effect on developing countries.
However, others argue that because many of the poorest countries are net importers of food,
these countries would be harmed if developed countries’ grain subsidies are removed.