There is growing recognition of the need for discussions on agriculture and trade to address the challenges of sustainability. Governments have a range of options for harnessing trade policies to promote sustainable production and trade and discourage unsustainable practices. While many of these options can be implemented unilaterally, effective solutions to deal with transboundary environmental challenges will require multilateral approaches. This article explores new windows of opportunity to advance cooperation in this area in the World Trade Organization (WTO).
Land-based agriculture provides the bulk of the world’s food supply and represents a critical source of feedstock, fuel, and livelihoods for hundreds of millions of smallholder farmers. However, the sector is failing to deliver food and nutrition security for all. After significant progress in reducing food insecurity, the number of people affected by hunger globally rose to 828 million in 2021—an increase of 150 million since the outbreak of the COVID-19 pandemic. Meanwhile, agriculture contributes directly or indirectly to environmental degradation, deforestation, soil pollution, and biodiversity loss. It also represents nearly a quarter of global emissions when counting agriculture, forestry, and other land use, according to the Intergovernmental Panel on Climate Change.
In the coming years, a core challenge is to provide healthy and nutritious food to 9 billion people by 2050 while responding to the rapidly changing diet of a growing middle class in urban areas. Meeting this target will require improving productivity, access, availability, and stability of food supply while protecting fragile ecosystems, restoring biodiversity, increasing soil productivity, rationalizing the use of water, and reducing greenhouse gas emissions.
Trade and Sustainable Agriculture: A Multidimensional Relation
International trade and trade policies have a complex role to play in this equation. In the absence of effective regulations, trade can exacerbate environmental challenges associated with food production. On the other hand, with roughly 80% of the world population living in net food-importing countries or relying on imports to meet at least some of its nutritional needs, trade has a critical role to play in meeting calorific needs and a balanced diet of macro- and micronutrients. It is also essential in offsetting climate-induced production shortfalls, water scarcity, or desertification. In spite of this, agricultural markets remain particularly thin, with the share of production traded internationally only reaching 23% on average and even less for key staple foods, such as rice or maize. As a result, a growing number of countries depend on a few exporters to meet their nutritional needs—which makes them highly vulnerable to supply chain disruptions and price volatility, as illustrated by the price spikes from 2006 to 2008 and, more recently, the food and energy price crisis associated with the war in Ukraine. These interdependencies highlight the importance of an open and fair multilateral trading system that incentivizes sustainable production and consumption patterns and supports resilient food systems.
The need to ensure that trade policies proactively deliver for sustainable agriculture has been reaffirmed at the highest political level through the Leaders’ Declaration on Forests and Land signed by 141 countries at United Nations Climate Change Conference in Glasgow, or under the Dialogue on Forests, Agriculture, and Commodity Trade Dialogue supported by key global exporters and importers of agricultural commodities. Countries are also taking a range of unilateral measures, as illustrated by the new European Union mandatory due diligence requirement on deforestation-free supply chains. Finally, numerous private sector initiatives and international organizations are working to improve the sustainability of global supply chains, for example, through voluntary standards and traceability and transparency requirements.
How Can Trade Policy Contribute to Sustainable Agriculture?
At the national level, governments have a range of trade-related policy tools at their disposal to promote more environmentally sustainable agricultural practices or production methods. These can either encourage sustainable agriculture production and trade or discourage unsustainable practices. The measures themselves can take the form of:
- Measures at the border, such as tariffs targeting mostly imports
- Economic incentives, such as subsidies targeting mostly domestic producers
- Regulatory measures of a voluntary or mandatory nature targeting both domestic producers and imports
- International support measures promoting sustainable production and trade in third countries, for example, through technical assistance or technology transfer.
See Table 1. Trade and Trade-Related Policy Tools to Promote Sustainable Agriculture in the TESS policy brief Trade and Sustainability in the Agricultural Sector: Options for Multilateral Trade Cooperation.
The measures highlighted here can arguably be pursued unilaterally for the most part. Their effectiveness, however, will greatly increase if they are applied collectively and consistently among a range of countries. This is especially the case for measures designed to remove perverse incentives (such as environmentally harmful subsidies) or foster trade in environmentally preferable products. In a similar vein, making sure that environmental regulations and standards are applied in a way that ensures interoperability across jurisdictions (e.g., through equivalences or mutual recognition) and minimizes trade frictions requires international cooperation. More broadly, in a globalized economy dominated by highly integrated supply chains, addressing transboundary challenges requires coherent policy approaches across jurisdictions.
What Role for the WTO?
Discussions in the WTO provide a critical avenue for multilateral cooperation, and several members have emphasized the need to address sustainability concerns. However, since the 2015 Nairobi agreement to phase out export subsidies, negotiations remain in a deadlock and two consecutive WTO ministerial conferences have failed to provide guidance on next steps. At the 12th WTO Ministerial Conference in June 2022, members nonetheless issued a landmark Declaration on the Emergency Response to Food Insecurity in reaction to the trade disruptions and excessive volatility resulting from the pandemic and the conflict in Ukraine. The declaration calls for a work program under the Committee on Agriculture to consider the needs of least developed countries and net food-importing developing countries (NFIDCs) and how to increase their resilience in responding to acute food instability.
Finally, the Trade and Environmental Sustainability Structured Discussions launched in November 2020 at the WTO provide a new avenue to spur discussion on sustainable agriculture and trade. Its workstream on subsidies, in particular, has identified agriculture and environmentally harmful support measures as a key area of focus in 2023. More generally, the initiative provides a space to address a range of agriculture-related issues, as reflected in the ministerial statement’s call to promote sustainable supply chains and address challenges and opportunities arising from the use of sustainability standards and any related measures—especially for developing countries.
Three Windows of Opportunity
As we move to the 13th WTO Ministerial Conference, these developments open three critical windows of opportunity to address sustainability concerns in agriculture. Discussions in these areas should complement, and not replace, ongoing talks in the special session of the Committee on Agriculture, which mostly deal with the trade-distorting and food security dimension of agriculture policies. A first avenue is around the environmental impacts of agricultural subsidies. A notable challenge in this area will be defining what constitutes environmentally harmful subsidies, keeping in mind the highly context-specific nature of support measures and the balance to strike between different policy objectives. To achieve this, members will have to look beyond existing subsidy categories or boxes. Building on the lessons learned from the fisheries subsidy negotiations, a promising approach might involve identifying a set of unequivocally environmentally harmful practices and prioritizing action on any form of subsidies supporting them. This could ultimately take the form of a negative list targeting clearly unsustainable agricultural practices (e.g., subsidies to mechanical tillage, or input subsidies involving hazardous or prohibited chemicals). This would directly contribute to target 18 of the new Global Biodiversity Framework, which calls for reducing subsidies by at least $500 billion a year by 2030, starting with the most harmful incentives.
A second set of issues relates to sustainability requirements, including voluntary sustainability standards, regulations, and conformity-assessment procedures. Concerns in this area have been raised with regard to unilateral initiatives, such as the due diligence requirements proposed by the European Union and the United Kingdom on deforestation-free supply chains and the compliance costs that this would imply for developing country exporters. Here, members may want to explore a range of trade-related approaches to promote sustainable supply chains, including through positive incentives in the form of additional market access for sustainably produced goods. There is also scope for a discussion on how recognized voluntary standards can be leveraged to demonstrate compliance with different government regulations. This would provide flexibility and various means for producers to fulfill mandatory sustainability requirements and would go a long way in reducing compliance costs while fostering mutual recognition or equivalences.
Finally, discussions under the new work programme on food insecurity provide a unique opportunity to look at how the multilateral trading system can support the resilience of least developed countries and NFIDCs in responding to acute food instability and external shocks. Current WTO disciplines were designed at a time when agricultural markets were characterized by production surpluses and long-term declining prices. Today, the main challenges relate to supply chain disruptions, high prices, excessive volatility, and resource scarcity. Part of the discussion consists, therefore, in rethinking certain rules or at least supplementing them to ensure that importing countries can effectively rely on international markets in times of crisis, but also build more resilient agricultural systems in the face of external shocks, including climate change. Relevant issues in this area include disciplines on export restrictions imposed by net food-exporting countries, public stockholding policies to ensure accessibility and availability of food, food aid policies, and financing mechanisms to ensure normal imports of food. It should also address critical technical assistance needs to build regional and domestic supply chains and associated infrastructure, increase agricultural productivity, and build climate-resilient food systems, including through new technologies.
Depending on members’ political will, discussions in these areas could lead to new disciplines in the form of subsidy prohibitions, binding commitments, or enhanced transparency requirements. Members should, however, be open to exploring other types of outcomes ranging from soft law instruments like guidelines fostering good practices to unilateral pledges or voluntary commitments. As highlighted above, these discussions should not detract or divert attention from ongoing agriculture negotiations. They should complement them and help catalyze discussions on how trade and trade policies can contribute to a more integrated approach to foster the sustainability of food and agricultural systems—a topic that is only likely to gain momentum in the coming years.
Christophe Bellmann is Head of Policy Analysis and Strategy, Forum on Trade, Environment, & the SDGs (TESS)
This piece was first published on 14 April 2023 in IISD Trade and Sustainability Review.