agriculture

policy brief

Agricultural Trade and Domestic Policy

Reform: Better Together January 2019

 gricultural and food sectors are closely connected with other sectors, both within countries
A
and across borders in global value chains.
 ountries can enhance the competitiveness of their agro-food sectors through more open trade
C
policies and reducing the impacts of non-tariff measures that raise trade costs.
 reater gains can be realised through widespread multilateral reforms, and preferential and
G
regional trade agreements that encompass countries at all stages of development.

What’s the issue?

Agricultural and food markets have changed a lot over
the past two decades. Today, domestic and international
agro-food markets are more closely integrated than ever
before. Overall agro-food tariffs have fallen and many
countries have reduced their use of trade-distorting
producer support. Trade in agro-food products has grown
strongly, including between emerging and developing
countries, which have increased in importance as both
suppliers and consumers of agro-food products.
Increasing trade growth has coincided with deeper
integration of the world food system. The agricultural and
food sectors are more closely connected with other sectors
of the economy, both within countries and across borders
in global value chains (GVCs). Within these GVCs, the
activities and inputs used to produce primary products,
and those that transform them into food, clothing and
other products are spread over several countries. These
linkages play an important role in driving agro-food sector
development, spreading innovation and enhancing the
competitiveness of sectors in both global and domestic
value chains.

Figure 1. Developments in agricultural markets and policies since 2001 (percent change)

2001-2014/16 1990-2000

Production

Prices (food)

Trade

Tariffs (% point)

OECD PSE (% point)

-15 -10 -5 0 5 10
% change

www.oecd.org/agriculture tad.contact@oecd.org @OECDagriculture

 gricultural Trade and Domestic Policy
A
Reform: Better Together

Domestic support measures continue to •P

constrain further integration of agro-food
markets
While international agro-food markets have evolved, most
countries continue to support their agriculture sector
through measures that distort trade. By reducing trade
volumes, these measures have significant negative effects
on the welfare of consumers and the competitiveness
and resilience of the agriculture sector, as well as global
food security. While many trade and domestic support
policies aim to increase food production, much evidence
suggests that they fail to achieve this goal and that global
production would be higher without such support.
 rovide an enabling environment and promote
agricultural productivity growth, as this can enhance the
competitiveness of agro-food exports and participation
in GVCs. This includes appropriate investments in
transport infrastructure, education and innovation.
Importantly, the gains from reform are greatest when all
countries act together through widespread multilateral
reforms, and through preferential and regional trade
agreements. This includes agreements that lock in actual
liberalisation (such as by binding applied tariffs) and
advance co-operation on trade-related regulatory issues
that influence the gains from agro-food trade.

Other measures that affect the flow of agro-food products

across borders can also reduce trade. Non-tariff measures
(NTMs) – laws, regulations and requirements such as
sanitary and phyto-sanitary measures, technical barriers
to trade, and customs procedures – can increase trade
costs. While many of these measures are implemented
with consumers’ health and the environment in mind,
they are not always based on scientific evidence.
Further reading
• OECD (2019), “The changing landscape of
agricultural markets and trade: prospects for future
reforms”, OECD Food, Agriculture and Fisheries
Papers, No. 118, OECD Publishing, Paris, https://
doi.org/10.1787/7dec9074-en

• OECD (2016), Evolving Agricultural Policies

Trade and agricultural support measures that restrict or and Markets: Implications for Multilateral Trade
increase the cost of trade harm countries’ own economies Reform, OECD Publishing Paris, http://dx.doi.
as well as those of trading partners. Protectionist policies org/10.1787/9789264264991-en
reduce sector growth and export competitiveness
by increasing the cost of inputs, and can constrain
participation in global value chains. Globally, around 24%
of agro-food export value comes from imported inputs:
services and industrial inputs (for example, machinery
and fertiliser), but also agro-food products, such as
feedstuffs and products for further processing. Overall,
obstacles to trade increase the production costs in GVCs
and unnecessarily increase the price to consumers.

What should policy makers do?

In addition to pursuing more open trade policies and

reducing the impacts of measures that raise trade costs,
policymakers could enhance these gains by:

• Reduce agricultural support and barriers to access

markets that distort trade, such as tariffs. Those
protectionist policies reduce sector growth and export
competitiveness by increasing the cost of inputs, and
can constrain sector participation in GVCs.

• Ensure that NTMs are appropriate, transparent, science-

based, and do not overly restrict trade. International
regulatory co-operation can help countries to reduce
the trade costs of differences in domestic regulations –
without compromising the societal goals that motivate
their use.

• Reduce barriers to services trade. Services form an

important part of value added in agro-food exports
and in the final product, and ensure that GVCs operate
efficiently.

www.oecd.org/agriculture tad.contact@oecd.org @OECDagriculture