18th March 2008
Trade, Agriculture, the Environment and Development: Reaping the Benefits of Win-Win-Win?
Agriculture is a key sector for most developing countries. In the least-developed countries it contributes nearly a third of GDP, compared with less than three percent in developed countries. The poor in most developing countries are heavily engaged in subsistence farming, and food accounts for a significant proportion of all poor people’s expenditure. Moreover, a high proportion of the poor live in rural areas — more than 60 percent worldwide, nearly 90 percent in China and Bangladesh, and between 65 percent and 90 percent in sub-Saharan Africa.2 Emphasising the link between agriculture, the environment and development, more than half of the world’s poorest people live in ecologically vulnerable areas.3 And those developing countries that have enjoyed the fastest agricultural export growth have also tended to achieve faster GDP growth, with accompanying increases in rural incomes and poverty reduction.4 In short, for these people what happens to agriculture in the Doha Development Round is not simply an abstract policy question.
Despite the obvious inter-linkages between, trade, agriculture and poverty alleviation, the international trade in agricultural products continues to be heavily distorted by developed world policies. This paper briefly delineates the relationship between trade and economic growth and then reviews developed country5 agricultural protection policies with a focus on export subsidies, domestic support and tariff policies. The paper makes the specific point, however, that we need to be realistic about what the reform of developed world agricultural policies can and cannot do. Such reform alone cannot deliver development by itself.
The second part of the paper examines the way in which the environment is increasingly being used by some countries to justify the retention of subsidies. While one should acknowledge that subsidies can have both positive and negative effects on the environment, the important point will be how subsidies might support agreed (contestable and transparent) public good initiatives in anon-trade distorting manner. In this regard, trade negotiators need to be clear on the issues and, in particular, decide how to deal with them. The paper argues that the WTO may be the obvious place to develop disciplines on this, but that it is fraught with complications and sensitivities.