Why Did Global Food Prices Rise? 1. Farmers in the United States and in Europe benefit from government policies to promote the production of ethanol because they receive government subsidies to produce crops that can be turned into biofuels and it gives the farmers an incentive to plant crops such as corn and soybeans. However, this policy harms foreign producers of these foreign crops. Since U. S. nd European farmers have subsidies, they have lower costs than the foreign farmers and the foreign farmers may struggle to compete. The high tariffs on imported sugar cane in the United States and Europe benefit the American and European farmers of corn and soybeans because since the price of sugar cane is higher, sugar cane farmers cannot compete with the other farmers. These farmers who produce crops such as soybeans and corn used to create biofuel benefit because the cost of producing these crops is lower than sugar.
Thus, the American and European farmers of corn and soybeans benefit, while farmers of sugar cane, such as Brazilian farmers, are harmed because they cannot compete in the American and European market for biofuel because their prices are higher due to the tariffs. The environment is also harmed because the biofuel made out of sugar cane burns cleaner than ethanol made of corn or soybeans. 2. With the risk of the food supply in poorer nations being dramatically reduced, leading to malnourishment and starvation, rich countries should assist in preventing this phenomenon from happening.
Rich countries could help lower the food prices by not giving subsidies to farmers who produce crops that are used to produce biofuels. Since the subsidy gives farmers incentives to farm crops such as corn and soybeans, it takes away resources and land to produce other crops used primarily for consumption. If countries stop giving subsidies for crops used to produce ethanol, more energy and resources can therefore be used to farm crops used primarily for food, such as wheat.
If more food crops are produced, the price will go down for these crops due to the theory of supply and demand, since there will be more food for consumption. By eliminating subsidies on crops such as soybeans and corn, wealthier nations can help increase the food supply, which will benefit poorer nations. 3. In terms of creating a healthier environment, the governments should continue to distribute subsidies to farmers of crops used to create ethanol because it will expedite the transition from gasoline to ethanol, thus creating cleaner energy sources faster.
However, from a free trade standpoint, the subsidies give foreign producers of similar or substitute crops to be at a disadvantage because the subsidies favor domestic farmers through decreasing costs. I think the best policy to implement to lower CO2 emissions without further inhibiting trade would be to keep the subsidies at the level they currently are at because cleaning up the environment is a serious and important concern, but it should not be done if it causes significant harm to free trade and market systems.
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