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GTAP Resource #1987

"A General Equilibrium Analysis of the Impact of Eliminating US Cotton Subsidies on US and World Cotton Market"
by Wubeneh, Nega


Industrialized developed countries are blamed for the impasse in the Doha round of world trade negotiations by refusing to deal with their supports to agricultural sector. The OECD countries together annually spend about $300 Billion on agricultural subsidies. The US, EU and Japan alone account for almost 82% of the subsidies. The US cotton subsidy, which has been ruled illegal by the WTO after a successful challenge from Brazil, Australia and four African countries, has become the target of domestic and international critics. This paper simulates the potential impacts of removing all the US cotton subsidy programs using the multiregion GTAP applied general equilibrium model. Results predict that, as a result of the removal of the subsidy, US cotton output would decrease by 26% and US domestic price rises by 31%. The US cotton export is also expected to decline by 65% and the world price of cotton is expected to rise by 5.6%. Other major cotton producers are expected to respond to the decrease in US output and exports and the higher world prices. Consequently, cotton output is expected to increase by 15% in Australia, by 10% in SSA, 5.2% in Brazil. The welfare effects indicate that, the US, Australia, SSA and Brazil are the major beneficiaries of this policy while Asian cotton importers and other subsidizing producers such as EU, the former USSR and Eastern European countries would lose from the implementation of the policy.

Key words: Cotton, US, applied general equilibrium, GTAP, subsidy

Resource Details (Export Citation) GTAP Keywords
Category: 2006 Conference Paper
Status: Published
By/In: Presented at the 9th Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia
Date: 2006
Version: 2
Created: Wubeneh, N. (4/26/2006)
Updated: Wubeneh, N. (4/26/2006)
Visits: 2,753
No keywords have been specified.

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