Government Intervention for Agricultural Goods

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Secondly, Japan is a representative country that protects and develops agriculture by tariffing on imported goods. According to a report from the world trade organization (WTO), food prices in Tokyo are 25%～100% higher than that of other main cities in the world. In Japan, eating expenditure is daily spending that each ordinary family have to calculate carefully. Japan tariffs on imported agricultural products in order to balance the domestic price of agricultural products. Take rice as an example, the price of rice in Japan market is eight times higher than the average price in the international market. Total imported rice accounts for only about 5% of the Japanese market, and most used in breeding industry and food processing industry, but the import tariff is as high as 490%. Meanwhile, government in bidding way gives import quotas to the highest bidder importer. This both controls total quantity and raise prices again. Moreover，the government sometimes rises domestic wholesale price when imported rice is sold in the market. As a result, the price of imported rice loses advantage, and the high quality and good taste Japanese rice can occupy the Japanese table for a long time. However, this agricultural intervention raised a lot of doubts. The consumer in Japan think their interests have been harmed because of high price agricultural goods. At the same time, foreign economists think the Japanese policy belongs to trade protectionism and will continue to lead to trade friction.

Finally, the milk quota in Europe can be discussed. In 1984, the CAP introduced the milk quota system to resolve the problem of overproduction. During that period, each EU Member State has a national quota which it distributes to farmers. Whenever a member state exceeds its quota, it has to pay a penalty to the EU. Obviously, a production quota on milk makes the supply of milk decrease. The quantity supplied became the amount permitted by fixed production quota. The supply of milk became perfectly inelastic at quantity permitted under quota. Meanwhile, the production quota raises the price of milk. When the CAP set a production quota, it left market forces free to determine the price. Nevertheless, it is completely unfair. individual quotas for farmers distort competition within the member states. Less competitive farmers who own quota rights produce too much, while more efficient producers are restrained.

In conclusion, this essay has briefly discussed the government interventions in agriculture as well as the examples that these interventions are used in some countries. Given the vast number of important applications, some negative influences of government intervention are undeniable. However, compared with positive impacts, the drawbacks are more serious. It always leads to the inefficient production that breaking the market. Therefore, the government should not intervene the agriculture.

References

Investopedia. (2016). Tariff. Retrieved 6th March 2016 from http://www.investopedia.com/terms/t/tariff.asp

Malkiel B G. (2003). The efficient market hypothesis and its critics[J]. The Journal of Economic Perspectives 17(1): 59-82.

Mark. A. (2014). Milk quota abolition will create North European production belt. Retrieved 6th March 2016 from http://www.dairyreporter.com/Markets/Milk-quota-abolition-will-create-North-European-production-belt

Robin.B and Michael.P(2006). “Chapter 6. Efficiency and Fairness of Markets”. Essential Foundations of Economics. Addison Wesley. ISBN 978-0-32-136502-6.