International Trade and the Enterprise †My Assignmenthelp.Com

Question: Disuses about the International Trade and the Enterprise? Answer: Introduction In the modern era of industrialisation, the agricultural subsidy can be termed as the order to the time so that agricultural industry can receive substantial support from the government of the respective countries. Precisely, the agricultural subsidy is paid to the farmers and businesses associated with agriculture sector by the government. The aim of the agricultural subsidy is to offer supplementary measures so that the income of the farmers can be protected. Also, the agricultural subsidy has been delivered to the target audience to manage the supply side of agricultural commodities (Paiva, 2008). Invariably, the subsidy has made a substantial influence on cost management of the agricultural products. In a broader perspective, the study has been evaluated describing the positive as well as negative aspects included in agricultural subsidies in different nations. The study mainly investigates the scenario of agricultural subsidies offered by the government of Australia, the United States of America, and China respectively. Based on the reports of the investigation, the subsidy scenario of the economies has been analysed in the study paper defining the positive and negative aspects (Paiva, 2015). Although many of the economists have argued against subsidies provided to the agricultural sector, it can be identified as one of the most comprehensive factors influencing the productivity and cost management of agricultural commodities worldwide. Subsidies in Agriculture Sector Australia The Australian government has taken strong initiatives by providing infrastructure subsidies, export subsidies, and labour subsidies towards the agricultural industry. Meanwhile, the leading aim of agricultural subsidies in Australia is to influence the cost and supply of agricultural commodities. Apart from that, Australian Government supports agricultural subsidies in case of structural changes in the industry. Decisively, the agricultural industry in Australia has faced significant challenges. For instance, lack of skilled labours can be defined as one of the major issues affecting the productivity of the sector (Batt, 2015). Therefore, labour related subsidies have been offered by the government influencing the efficiency of the industry. Reportedly, Australian agricultural sector receives government subsidies of as low as three percent. In the underlying, the section, the positive and negative aspect of agricultural subsidies in the target economy has been analysed. Positive Aspect Consistent Income of farmers: The Australian Agricultural Policy has somewhat supported the income status of the farmers by offering subsidies. Though the offered subsidies are considerably low in compared to the other sectors, the agricultural subsidy has substantially supported the consistent income of the farmers associated with the agricultural industry (Lokhorst, Staats, van Dijk, van Dijk, de Snoo, 2011). Notably, the Australian agricultural subsidies are not significant for the long-term viability of the industry. Manage Supply of Agricultural Commodities: By offering subsidies to the farmers, Australian Government has tried to manage the supply of agricultural commodities. Precisely, subsidies encourage the farmers to increase the production so that the right amount of agricultural products can be produced to meet the requisite of the target population (Ashra, Chakravarty, 2007). Such initiatives have also boosted the economic status of the country as well. Negative Aspect Government Interventions: In the case of the Australian market, the intervention of the government in the agricultural sector has been taken in a negative way by the major crop producers (Batt, 2015). As the intervention of government can dictate the terms of cost and supply of the agricultural products, the role government subsidies have been questioned. Inconsistency in subsidy: On the other hand, Australian government offers subsidies towards selected crops. As a result of the consequences, unsubsidised farmers have suffered during the production of crops (Foust-Meyer, O'Rourke, 2015). Therefore, unsubsidised farmers have to quote higher offer price towards the purchasers. Hence, the inconsistency in subsidies can affect the farming business of many farmers in an adverse way. The United States of America In the United States of America, the scenario of agricultural subsidy is substantially different to that of Australia. In order to stabilise the farm income, the US Government has offered around US$60 billion every year to the industry farmers (Babic, Milosevic, Maksimovic, 2015). Moreover, the US Farm Bills have gone against the economists who believe that the country does not need to provide a subsidy towards the agricultural sector. Although the USA is not an agricultural-centric economy, such subsidy policy has helped the farmers to share the burden in their agribusinesses (Gardner, 2009). In the underlying section, the positive and adverse aspects of the US agricultural subsidy have been illustrated. Positive Aspect Stabilise Infrastructure in Agricultural Sector: By providing financial aid to the US farmers, the government has helped the farmers improving the infrastructure in the agricultural sector. The government subsidy has been utilised by the farmers to facilitate latest farming technology and transportation system. Thus, subsidies have improved the productivity of the farming commodities in the US (Babic, Milosevic, Maksimovic, 2015). Decrease Agricultural Imports: The high amount of government fund spent on the improvement of the agricultural sector increases the productivity of crops and livestock in the nation. Hence, it helps the US economy to be self-dependent to meet the growing needs of the population. In other words, the agricultural imports decrease due to high supply in the market that helps the nation to maintain a better economic balance. Furthermore, the countries can earn foreign income by exporting the excess supply of agricultural production. Negative Aspect Harm to the poor in developing countries: The excess production of agricultural products in the developed country like the United States leads to oversupply crops and livestock. The oversupply of agricultural products reduces the price of crops in the international market. In some cases, the global price of crops even falls below the production cost in the developing nations (Gardner, 2009). Hence, the excessive subsidy of the government to the agricultural sector in the United States adversely impacts the earning of the poor farmers in the developing countries. Increase the burden on government budget: The high amount of subsidy provided to the farmers in the agricultural sector increases the burden of the US government over its annual budget. According to the new economic introduced by the US government, the Senate proposed to spend around $955 billion over the upcoming ten years, which is an important increase from the 2008 farm bill that proposed to spent around $604 billion over the ten years (Ramey, 2014). Hence, the rising expenditure of the government in the form of agricultural subsidy exerts pressure over the annual budget of the nation. China China is the third largest economy in terms of its percentage of government spending on agricultural subsidy. According to the statistical data, the country spends around 15 percent of the total annual budget on agricultural subsidy. Currently, the amount spent by China on agricultural subsidy stands at 1.6 trillion Yuan, which is equal to US$261.09 billion (Huang, Wang, Zhi, Huang, Rozelle, 2011). On the other hand, the government proposed to increase its agricultural subsidy by around 10 percent in the upcoming years. The primary reason for such high amount of spending is the increasing population of the country (Taniguchi, Tachikawa, 2006). Meanwhile, it is expected by the US government that the increasing spending of the Chinese Government on Agricultural sector will negatively impact the international trade. Positive Aspect Promote agricultural infrastructure: The high spending of the Chinese Government on agricultural sector helps to promote the agricultural infrastructure of the nation. The poor farmers are helped to learn modern techniques of farming that increases the agricultural productivity. Furthermore, the increase in the productivity of crops helps the economy to meet the growing demands of its population (Huang, Wang, Zhi, Huang, Rozelle, 2011). Decrease the dependence on agricultural import: The high productivity of crops lead to oversupply in the market. On the other hand, it helps the government to make the price of agricultural products affordable to the low income people (Keyzer, Qiu, 2017). Additionally, the high expenditure of the Chinese government on agricultural sector makes the economy capable of meeting the demand of the citizens that further reduces the dependence on agricultural import. Negative Aspect Imbalance in international Trade: The excess supplies of crops are exported to different other developing nations of the world that are poor in agricultural production. The high productivity of agricultural products in China reduces the aggregate price of crops in the international market (Huang, Wang, Zhi, Huang, Rozelle, 2011). Hence, an imbalance occurs in the international trade due to the falling price of the agricultural products. High burden on tax payers: The increasing expenditure of the Chinese government on agricultural sector increases the burden over the tax payers (Keyzer, Qiu, 2017). Around 15 percent of the tax paid to the government is used to pay subsidy to the farmers. Hence, the increase in the agricultural subsidy will further increase the pressure over the tax payers. Conclusion By considering the above analysis, it can be seen that the government of Australia spends the lowest amount in the form of agricultural subsidy out of the three chosen countries. On the other hand, China is the highest payer of agricultural subsidy. The subsidy paid to the farmers helps the government to control the production of crops in the nation. Additionally, it is an economic policy that is used to control the price of agricultural products in the nation. Hence, it is important for the Australian government to increase its agricultural subsidies to promote the sector. However, China and the United States must put a check on its agricultural subsidy to reduce the pressure over the tax payers and maintain a balance in international trade. References Ashra, S., Chakravarty, M. (2007). Input Subsidies to Agriculture: Case of Subsidies to Fertiliser Industry across Countries.Vision: The Journal Of Business Perspective,11(3), 35-58. Babic, V., Milosevic, B., Maksimovic, G. (2015). Economic subsidies in agriculture.Ekonomika Poljoprivrede,62(3), 693-704. Batt, P. (2015).Australia's 'five strong pillar economy': agriculture.The Conversation. Retrieved May 2017, from https://theconversation.com/australias-five-strong-pillar-economy-agriculture-40388 Foust-Meyer, N., O'Rourke, M. (2015). High Tunnels for Local Food Systems: Subsidies, Equity, and Profitability.Journal Of Agriculture, Food Systems, And Community Development, 1-12. Gardner, B. (2009).American Agriculture in the Twentieth Century(1st ed.). Cambridge: Harvard University Press. Huang, J., Wang, X., Zhi, H., Huang, Z., Rozelle, S. (2011). Subsidies and distortions in Chinas agriculture: evidence from producer-level data.Australian Journal Of Agricultural And Resource Economics,55(1), 53-71. Keyzer, M., Qiu, H. (2017). China's Agricultural Development: Challenges and Prospects.European Review Of Agricultural Economics,34(3), 421-424. Lokhorst, A., Staats, H., van Dijk, J., van Dijk, E., de Snoo, G. (2011). What's in it for Me? Motivational Differences between Farmers' Subsidised and Non-Subsidised Conservation Practices.Applied Psychology,60(3), 337-353. Paiva, C. (2008). Assessing protectionism and subsidies in agricultureA gravity approach.Journal Of International Development,20(5), 628-640. Paiva, C. (2015).Assessing protectionism and subsidies in agriculture(1st ed.). Washington, DC: Internat. Monetary Fund. Ramey, E. (2014). Farm Subsidies and Technical Change: State-Mediated Accumulation in U.S. Agriculture.Rethinking Marxism,26(4), 472-489. Taniguchi, Y., Tachikawa, M. (2006). An Agriculture without Subsidies?.Journal Of Rural Problems,41(4), 380-381.