Describe the impact of each of the following goals from the Hong Kong WTO meeting on (i) domestic prices and welfare of the country taking the action and (ii)

world prices and welfare for the partner countries.

a. Elimination of agriculture export subsidies

b. Reduction of agricultural tariffs

c. Duty-free, quota-free access for 97% of goods originating in the world’s least-developed countries Consider a large country with export subsidies in place for agriculture. Suppose the country changes its policy and decides to cut its subsidies in half.

a. Are there gains or losses to the large country, or is it ambiguous? What is the impact on domestic prices for agriculture and on the world price?

b. Suppose a small food-importing country abroad responds to the lowered subsidies by lowering its tariffs on agriculture by the same amount. Are there gains or losses to the small country, or is it ambiguous? Explain.

c. Suppose a large food-importing country abroad reciprocates by lowering its tariffs on agricultural goods by the same amount. Are there gains or losses to this large country, or is it ambiguous? Explain.

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