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Understanding the harmful environmental impact of agricultural subsidies

Published 06 December 2022

Trade-distorting subsidies have form the bulk of domestic government support to the agriculture sector. Such support is not just detrimental to trade outcomes but also has a harmful environmental impact. Watch this webinar to understand the unintended consequences of agricultural subsidies and what can be done to address them.

The Institute for International Trade at the University of Adelaide assessed the environmental impact of production-linked and trade-distorting agricultural subsidies in a recently published report. In this webinar, the speakers discussed the findings and outlined recommendations for policymakers.

Ken Ash, Visiting Fellow at the Institute for International Trade, University of Adelaide and one of the authors of the report, discussed the main findings. He observed that input and output-linked subsidies are the most damaging form of agricultural support since they incentivize producers to overuse inputs such as fertilizers, pesticides, etc. and over-produce outputs which strain environmental resources and distort land use patterns. Unfortunately, schemes like these form the bulk of domestic government support for the agriculture sector. To address this pressing challenge, he said it was crucial to make research and information on the damages caused by these policies, widely available; address this issue in multilateral and plurilateral platforms; and focus on comprehensive subsidy reform across sectors. He also remarked that it was not enough that ‘experts talk to other experts’, and stakeholders at all levels should come together to co-develop solutions.

Deborah Elms, Executive Director of the Asian Trade Centre cited a lack of transparency and lack of visibility on how discourses on subsidies, trade distortionary practices, and environmentally damaging practices engage with each other as prime reasons for the dearth of policy action on this issue. Politically influential agribusiness lobbies make this challenge trickier and a lack of multilateral forums prevents a regional or global initiative to address this challenge.

The session, moderated by Chuin Wei Yap, Program Director, International Trade Research, Hinrich Foundation, concluded with a Q&A for the panel of experts. The discussion focused on the domestic challenges faced in subsidy reform, explored the alternative support structures governments can provide to the agriculture sector, and examined the relevance of the findings to the Asia-Pacific region.

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