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Ag Impacts

Ag collapse tanks growth and free trade

Francl 98 (Terry, Senior Economist and Commodity Specialist – American Farm Bureau Federation, Et al., “Impact of the Kyoto Protocol on Agriculture”, The American Council fore Capital Formation, October,

Agriculture's Impact on the U.S. Economy No single study can capture the ripple effect that a decline in farm income would have on other aspects of the agricultural and non-agricultural economy. A 1998 study by the Sparks Companies, using data from Standard and Poor's DRI and based on the commitments agreed to by the United States in Kyoto, found significant economic effects: Consumer food prices would rise. A 2 percent decline in GDP resulting from the Kyoto Protocol would in turn cause a 0.7 percent decline in domestic demand for food. This would create a mild, short-term, downward pressure on food prices, counterbalanced by the inflationary pressures of higher energy costs. On net, food consumption expenditures would rise 2.6 percent. This would have only minor effects on the average U.S. consumer, whose food costs account for 11.9 percent of disposable income. But the impact on poor families would be considerable. The 37.4 percent of U.S. households earning under $20,000 after taxes spend between 21.4 and 100 percent of their income on food. Public assistance demand and costs would rise. The U.S. Department of Agriculture allocates more than $39 billion annually to six food programs, most notably the child nutrition programs and food stamps. Reduced employment could add roughly 500,000 to the food stamp rolls and raise costs of USDA food programs 5 percent annually, or by $2 billion. Agricultural exports would fall. By increasing the energy costs of farm production in America while leaving them unchanged in developing countries, the Kyoto Protocol would cause U.S. food exports to decline and imports to rise. Reduced efficiency of the world food system could add to a political backlash against free trade policies at home and abroad. Farm consolidation would increase. "The higher energy costs," wrote DRI/McGraw-Hill, "together with the reduced domestic and export demand, could lead to a very severe decline in investment in agriculture, and a sharp increase in farm consolidation. Small farm numbers likely would decline much more rapidly than under baseline conditions, while investment even in larger commercial farms likely would stagnate or decline."

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