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What policies are needed so that reforms in agricultural subsidies in developed countries can translate into real benefi ts for poor farmers and for the environment in developing countries?
Agricultural subsidies are one of the factors determining whether and how agriculture helps the poor in developing countries to make a sustainable livelihood. Reforming the current agricultural subsidy systems in developed countries provides an opportunity to generate a number of positive impacts:
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for poor farmers in developing countries whose ability to compete is hampered by subsidy-driven overproduction in rich countries;
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for taxpayers and consumers in developed countries faced with rising defi cits;
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for the environment in developed countries where subsidies contribute to ecosystem degradation; and, possibly,
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for the environment in developing countries where poverty is one driver of environmental degradation.
However, an agreement to reduce agricultural subsidies at the international level does not guarantee that the poor and
the environment will benefi t; the realization of benefi ts also requires the implementation of strategic domestic policies in
developing nations.
Even in the absence of agricultural subsidy reductions in the World Trade Organization’s (WTO) Doha Trade Round—a likely scenario with the recent collapse of the negotiations—all countries can take steps to make agriculture work for the poor and for the environment. Without a WTO agreement, there will still be immense pressure on developed countries to reduce their agricultural subsidies. This comes from developing countries, which are expected to fi le more cases in the WTO challenging these subsidies, and from within developed countries because of domestic or regional (in the case of the European Union) competition for scarce budgetary resources. Moreover, even without a new WTO Agreement, trade-induced changes that affect agriculture are inevitable, whether they come in the context of global, regional, or bilateral trade agreements or through sheer market changes.
Trade can be an effective vehicle for poverty reduction but good governance, at both international and national levels, is
necessary so that increased trade benefi ts the poor, and prevents or minimizes ecosystem degradation (see Box 1). This
policy note1 identifi es what reforms developing countries need to implement in order to capitalize on reductions in developed
country subsidies. It recommends that countries adopt and implement a domestic policy reform agenda that is based on
a national assessment of the potential impacts of global trade decisions on ecosystem health and human well-being. The
note highlights the necessity for cooperation and support from development agencies and other international organizations to
help overcome the resource constraints that many developing countries will face in implementing such reforms.
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