Case Detail

Case Summary

Subsidies and the Global Cotton Trade

Case Number: 5-307-507, Year Published: 2007

HBS Number: KEL348

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Authors: David Besanko; Brett Burgess

Key Concepts

Subsidies, market distortion, social welfare, deadweight loss, industry supply curve

Abstract

The case describes the competitive advantages that U.S. farmers enjoy in the global cotton industry and the subsidies they receive from the U.S. federal government. Arguments for and against the subsidies are presented in the context of global competition. The case includes the data needed to estimate a supply curve for 2004 cotton production and predict the average 2004 cotton price using total cotton consumption for 2004. Students can also estimate the result of eliminating the U.S. cotton subsidies on the average 2004 cotton price.

The learning objective of the case is for students to have the opportunity to learn about the history and structure of U.S. cotton subsidies as well as their impact on global cotton prices. Students also are able to practice building and interpreting an industry supply curve.

Number of Pages: 14

Extended Case Information

Teaching Areas: Economics

Geographic: Global

Industry: Cotton farming

Organization Size: Large

Decision Maker Position: Chair, WTO Sub-Committee on Cotton

Decision Maker Gender: Male

Year of Case: 2004