Agriculture

The agricultural sector refers to the economic activities involved in the production, or simple processing, of crops, livestock and a few other products of living organisms, such as mushrooms and silkworms.

The importance of food to human beings is obvious. But agriculture also accounts for a large share of our fibres, and a small but growing share of the world’s fuel. Agriculture employs typically less than 3% of the working populace in industrialized countries, but more than 50% of the populace in some of the world’s least-developed countries.

Agriculture’s impact on the environment is enormous. Some 40% of the earth’s surface not covered by water or ice is used for growing crops or grazing animals. The water consumed for irrigation generally exceeds that used for non-agricultural uses in countries without abundant rainfall.

Governments in developed countries have been supporting agriculture for more than 150 years. From the middle of the 19th century, many European countries erected trade barriers to protect their farmers from competition from lower-cost goods produced abroad. Tariffs on agricultural products remain, on average, higher than for any other goods.

Many subsidy programs in OECD countries have their roots in two periods: the Great Depression, which coincided with severe droughts in Australia and North America, and the reconstruction of Europe and Japan following the Second World War. Governments were concerned, during both events, to keep farmers on the land, and in the post-war years to ensure a steady, reliable supply of food.

Today, support to agriculture is provided largely through tariffs, export subsidies, direct payments to farmers, and government expenditure on farming-related infrastructure. In absolute terms the bulk of subsidies is provided by the governments of OECD countries, and a few large developing countries.

Information on support to agriculture is collected at the national level in many countries. In some countries, such as Australia and New Zealand, government bodies have systematically provided this information over many years. Some countries also report aggregate data on subsidies to agriculture in their national accounts. In the United States, a non-governmental organization, the Environmental Working Group, has developed a searchable database on all direct payments, derived from government data. A similar, NGO-led effort has recently started up in Europe.

At the international level, member economies of the World Trade Organization (WTO) report their support to agriculture in the form of official notifications. The information contained therein is periodically summarized in reports by the WTO Secretariat. The Organisation for Economic Co-operation and Development (OECD) collects, and reports in a standardized format, data on support provided by its member countries (and by several other countries). This series traces back to 1979.

Although the sectoral subsidy accounts for agriculture are among the most extensive and internationally standardized, major gaps remain. Not all tax concessions available to produces (e.g., rebates or exemptions from excise taxes on fuel) are counted, nor are all subsidies provided by local and sub-national governments. Moreover, subsidies for the production of biofuels tend to be regarded by national governments and the OECD as more relevant to energy than to agriculture, and therefore are not reported. And only a fraction of the subsidies to irrigation, which some analysts have estimated could be in the tens of billions of dollars annually world wide, are reported in the accounts.

With the entry into force of the WTO’s Agreement on Agriculture, following the conclusion of the Uruguay Round of multilateral trade negotiations, subsidies (“export subsidies” and “domestic support” in WTO parlance) were for the first time subject to international rules. Some progress has been made, particularly in reducing production-linked support, but it has been slow. In the current, Doha Round of multilateral trade negotiations, tariffs and subsidies again rank at the top of the agenda.