Repurposing Global Agricultural Support

Key Points

• Countries around the world provide billions of dollars every year for agricultural support, with most of the benefits accruing to middle- and high-income farmers.
• Critics of agricultural subsidies may prefer a total global rollback, but this is widely believed to be politically untenable. In response, many have proposed repurposing subsidies to serve climate and nutrition goals.
• Repurposing subsidies to focus on either nutrition or climate change may positively affect one or both objectives, but the overall effects are surprisingly small and can involve outcomes that benefit one objective at the expense of the other.

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Recent studies project that based on current trends, governments around the world will likely provide over $240 billion in agricultural support by 2030.¹ The support is provided in many ways, including border measures such as tariffs that provide market price support and income subsidies based on production, input use, or fixed factors of production such as land that provide income support to producers.

About half of all subsidies and other forms of support flows to producers in high-income countries (HICs). Another third benefits producers in upper-middle-income countries (UMICs), and about one-sixth (almost all the rest) is provided to producers in lower-middle-income countries (LMICs).² In contrast, farmers in low-income countries (LICs) receive few benefits from agricultural support programs.

Many economists, perhaps most notably Professor D. Gale Johnson in the early 1970s, have long criticized agricultural support for distorting farmers’ production decisions and agricultural markets.³ Such subsidies create large negative impacts for the broader community, contributing to poorer water quality, increased greenhouse gas (GHG) emissions, soil erosion in fragile lands, loss of wildlife habitat, and other environmental concerns.⁴ Nutritionists have criticized subsidies as encouraging “unhealthy” diets and contributing to obesity and major health care challenges such as heart disease and diabetes.⁵

An obvious way to eliminate these externalities would simply be to eliminate agricultural support altogether. However, the issue is whether and how to compensate affected producers in ways that might make such reforms politically tenable. More recently, several studies have considered the impacts of “repurposing” and redirecting agricultural support programs toward achieving environmental, climate, and nutritional outcomes.⁶ Under these proposals, typically equivalent levels of subsidies and other forms of government support would be focused on reducing GHG emissions and other environmental externalities or improving nutrition.

Drawing from our recent research, here we ask and answer a series of straightforward questions about some of the major “repurposing farm subsidies” proposals intended to improve nutrition and reduce climate change impacts.⁷ The first question is whether the proposed innovations have much impact on either objective. The second is whether programs that reduce climate change impacts help or hinder the objective of improving nutrition for the population as a whole. A major finding is that, not surprisingly, initiatives that address one objective (for example, nutrition) may come at the expense of another objective (for example, GHG emissions).

We also briefly consider whether many of the repurposed support policies are consistent with World Trade Organization (WTO) trading rules. The conclusion here is that policies implemented by one country (or a group of countries such as the European Union) that may result in improved climate or nutrition outcomes could be subject to challenge under the WTO dispute settlement mechanism because of adverse economic impacts on other countries.

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Notes

1. Joseph W. Glauber and David Laborde, “Repurposing Food and Agricultural Policies to Deliver Affordable Healthy Diets, Sustainably and Inclusively: What Is at Stake?” (background paper, Food and Agriculture Organization of the United Nations, Rome, Italy, 2022).
2. The country classification is based on the World Bank. For the current 2023 fiscal year, low-income economies are defined as those with a gross national income (GNI) per capita of $1,085 or less in 2021, lower-middle-income economies are those with a GNI per capita between $1,086 and $4,255, upper-middle-income economies are those with a GNI per capita between $4,256 and $13,205, and high-income economies are those with a GNI per capita of $13,205 or more. For more details, see World Bank, “World Bank Country and Lending Groups,” https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups.
3. D. Gale Johnson, World Agriculture in Disarray (London: Palgrave MacMillan, 1973).
4. Ben Henderson and Jussi Lankoski, “Evaluating the Environmental Impact of Agricultural Policies,” OECD Food, Agriculture and Fisheries Papers no. 130 (2019), https://www.oecd-ilibrary.org/docserver/add0f27c-en.pdf?expires=1661967303&id=id&accname=guest&checksum=B739FDD6DC7DE440A541E0D61A5EC671.
5. Julian M. Alston, Daniel A. Sumner, and Stephen A. Vosti, “Farm Subsidies and Obesity in the United States: National Evidence and International Comparisons,” Food Policy 33, no. 6 (2008): 470–79, https://arefiles.ucdavis.edu/uploads/filer_public/21/26/2126a01d-a036-451c-91ab-c9445e0eeb68/alston_sumner_and_vosti_food_policy_2008.pdf.
6. Food and Agriculture Organization of the United Nations et al., The State of Food Security and Nutrition in the World: Repurposing Food and Agricultural Policies to Make Healthy Diets More Affordable (Rome, Italy: Food and Agriculture Organization of the United Nations, 2022), https://www.fao.org/3/cc0639en/cc0639en.pdf; Madhur Gautam et al., Repurposing Agricultural Policies and Support: Options to Transform Agriculture and Food Systems to Better Serve the Health of People, Economies, and the Planet, World Bank, January 2022, https://openknowledge.worldbank.org/bitstream/handle/10986/36875/P17064300a6dea0db09c8b0cf6a1dfe8b8a.pdf; and Food and Agriculture Organization of the United Nations, UN Development Programme, and UN Environment Programme, A Multi-Billion-Dollar Opportunity: Repurposing Agricultural Support to Transform Food Systems, 2021, https://www.fao.org/3/cb6562en/cb6562en.pdf.
7. Glauber and Laborde, “Repurposing Food and Agricultural Policies to Deliver Affordable Healthy Diets, Sustainably and Inclusively.”