Biodiversity: Why do farm trade policies matter?

14 October 2010

As negotiators head to Nagoya for another high-level meeting of the Convention on Biological Diversity, they will be well behind on their target to halt biodiversity loss by 2010. However, beyond the discussions this week at the CBD, policies and rules on farm trade will also have a major impact on the prospects for biodiversity and other public policy goals in both rich and poor countries.

Talks on draft CBD disciplines represent only one part of an emerging constellation of rules that could affect the relationship between farming and biodiversity. The provisions of the UN Food and Agriculture Organisation’s international treaty on agrobiodiversity [1], those of the UPOV plant-breeding convention, WTO rules on intellectual property and discussions at the World Intellectual Property Organisation all potentially influence the extent to which farming affects the diversity of life forms on the planet, both directly and indirectly – although these different legal instruments embody widely varying underlying notions of how different public policy objectives should be achieved.

While the relationships between these accords has now been explored extensively by negotiators and policy analysts [2], less attention has been focused on how farm trade rules currently under negotiation in the WTO’s faltering Doha Round could affect biodiversity – despite the fact that the ongoing trade talks could have far-reaching implications in this area. Proposed new ceilings on trade-distorting farm support and new rules on agricultural market access could affect biodiversity because of the implications they have for the competitiveness of different farm types and for different production systems in rich and poor countries.

Subsidies: A critical question

Subsidies that are linked to production levels, market price support or input subsidies can all reduce biodiversity through incentivising production techniques involving the destruction of habitats such as forests, wetlands or hedgerows; by encouraging intensive use of fertilisers, pesticides and herbicides; or by leading farmers to adopt unsustainable stocking densities for livestock. In a variety of ways, trade-distorting farm support can therefore be linked to biodiversity loss in agricultural ecosystems and those to which they are related.

In addition to the environmental damage such subsidies can cause, they are arguably also responsible for undermining food security and livelihoods in the developing world: the massive amounts of trade-distorting support provided in recent decades have contributed to the long term decline in agricultural productivity growth in poor countries, by creating disincentives for investment in farming [3].

Proposed new WTO rules will cap this support at a historical low – around $14.5 billion in the US, and around €22.1 billion in the EU – with potentially positive impacts on biodiversity, and on food security and livelihoods in poor countries.

However, the draft Doha deal places few restrictions on another category of support, known as ‘green box’ payments at the WTO: these will be exempt from cuts or any ceiling, on the basis that they cause no more than minimal distortion to farm production and trade. While experts tend to concur that these payments are generally less trade-distorting than payments that are directly linked to production levels, controversy continues over the extent to which they continue to affect farmers’ production decisions.

Decoupled ‘green box’ support now represents over 90 percent of US farm subsidies, and a large and growing share in the EU – almost two thirds of support, according to the trading bloc’s latest official report to the WTO. While some payments in this category are believed to promote biodiversity, such as some kinds of payments under environmental programmes, others may be neutral or even damaging.

For example, farmers may receive support under programmes that are explicitly targeted at biodiversity outcomes – such as sheep farmers whose grazing land may be important as a home to  rare butterflies. In other cases, environmental payments may be awarded for activities such as afforestation, which may replace biodiversity-rich landscapes with forest monocultures. At the root of the problem may be the lack of clear objectives, targets and monitoring for many subsidy programmes.

Support payments may also be disproportionate to the costs of implementing environmental standards, including those relating to biodiversity. One study has found that a farm in Cambridgeshire in the UK incurred costs of around €75 for respecting environmental regulations, but received €27,000 in direct payments, prompting some critics to query whether such subsidies are  in fact merely a disguised form of income support [4].

While some developing countries such as China are using green box subsidies to pursue environmental objectives in areas such forestry and for combating desertification, many still lack the financial resources to devote substantial support to farming, and remain concerned that the large and growing amounts of decoupled support in the developed world may provide producers in these countries with a competitive advantage over their own farmers.

Market access and biodiversity

Proposed new WTO rules on market access could also affect biodiversity outcomes, although the impact of the draft agriculture deal is harder to establish in this area. National rules and policies may be particularly important in determining whether tariff reductions for farm products are good or bad for biodiversity – an issue that has been largely absent from negotiators’ considerations during the trade talks.

Many developing countries are home to large numbers of subsistence farmers that are often ill-equipped to compete with cheap and sometimes subsidised exports from large-scale industrialised farming elsewhere: at the WTO, a coalition of these nations have sought to exempt key products from tariff cuts, and to establish safeguard mechanisms to protect their farmers from import surges and sudden price depressions, on the basis of food security, the protection of livelihoods and rural development concerns. The proposed flexibilities that developing countries are likely to be granted in these areas may in practice serve to safeguard traditional farming practices that are more supportive of biodiversity, even though this issue has not featured explicitly in the WTO debate.

More complex is the relationship between trade expansion and biodiversity. Many of the poorest developing countries are heavily dependent on the export of just a few unprocessed agricultural commodities: for these, greater access to lucrative markets elsewhere could be critical for economic growth and poverty reduction, but the impact on biodiversity may depend heavily on national environmental policies and regulations, and on countries’ ability to enforce these effectively.

There is growing interest in commercialising and trading goods that are derived from native biodiversity in developing countries – often through the use of labelling and certification schemes targeted at environmentally-conscious consumers. While such initiatives may offer a partial solution to the challenge of biodiversity loss, there is arguably a risk that they remain focused on a relatively limited number of ‘niche’ market products; furthermore, they are by their very nature unable to provide a systemic solution to the broader market failure in this area at the global level.

Trade in higher-value organic agriculture products may provide more broad-based economic benefits, as well as helping stem biodiversity loss: however, technical standards and health and safety requirements in developed countries may continue to hinder organic exports from the developing world. While under many circumstances organic agriculture may require support in order to remain economically viable, both developed and developing countries may still be able to generate positive impacts on biodiversity by reviewing national regulations and policies on input use, and investing in agricultural extension services in order to share expertise with farmers on ecological production techniques.

Biodiversity and farm trade: Towards a holistic approach

Climate change, population growth and changes in dietary patterns due to rising average incomes in the developing world are expected to place increased pressure on land and other resources in the years ahead – trends which may also be exacerbated by poor policy design in areas such as biofuels. Changes in farm trade policies that  foster productivity enhancements in poor countries and increase the value of local production will be key to addressing food security and employment needs whilst also ensuring that these pressures do not have negative impacts on biodiversity.

Many developing countries may need to take action to ensure that their national environmental, social and economic objectives are established and implemented in national level development strategies if they are to ensure that agricultural trade negotiations at the WTO are indeed supportive of their biodiversity goals. However, developed country agricultural trade policy reform must be a critical counterpart in order to ensure that such measures are effective. Refocusing farm subsidies on clear and measurable public policy goals, including biodiversity, must be a priority in this respect.

Irrespective of whether governments can agree to conclude the troubled Doha Round negotiations at the WTO, opportunities for pursuing these reforms are close at hand. The EU has already begun to consider the future shape of its Common Agricultural Policy, a discussion which could have important implications for biodiversity loss and other public public goals both at home and beyond. The US is soon to begin a similar discussion ahead of the next Farm Bill, the omnibus legislation that determines agricultural support programmes for everything from cotton to corn and rice. The active engagement of constituencies that are concerned about biodiversity will be essential if agricultural trade rules are to foster its conservation and sustainable use in the years and decades to come.

Jonathan Hepburn is Programme Officer for Agriculture at the International  Centre for Trade and Sustainable Development (ICTSD).

1 The FAO International Treaty on Plant Genetic Resources for Food and Agriculture

2 See, for example, Tansey, G and Rajotte, R (2008) "The Future Control of Food". Earthscan, UK.

3 ICTSD (2009), "Ensuring trade policy supports food security goals".

4 Cited in Brunner, A, and Huyton, H (2009) "The environmental impact of EU green box subsidies". In Meléndez-Ortiz, R, Bellmann, C and Hepburn, J, "Agricultural subsidies in the WTO green box: Ensuring coherence with sustainable development goals". Cambridge University Press, UK.

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