Agriculture continues to play an important role in the domestic and international policies of many countries, with government action often directed at improving competitiveness and the welfare of farming families and communities.
Although the agricultural sector makes a comparatively modest contribution to national income and employment in many OECD countries, governments intervene in many different ways in domestic and international markets to support agriculture.
Many of these government interventions, however, contribute to a reduction in economic efficiency, distortion of production and trade, obstruction of growth in developing countries and damage to the environment - mostly through production subsidies and trade barriers. Ultimately, the financial costs are borne by the consumer and the taxpayer.
The level of government support provided to agricultural producers remains high - estimated at $227 billion (EUR 172 billion) in OECD countries in 2010. Although some progress is being made to lower overall support levels and to move towards policies with fewer distorting effects on production and trade, much more remains to be done. In general, emerging economies such as China, Brazil and Russia have much lower levels of support to agriculture.
Policy makers in many countries have recognised that production subsidies and related border measures are a very inadequate way of meeting expectations concerning food and farming, whether they relate to the quantity and quality of food, to assisting developing and emerging countries or to safeguarding the environment and the landscape.
In this context a priority for OECD countries is breaking the link between agricultural support instruments and commodity production - or decoupling of agricultural support. Once that is achieved – and many countries are making progress in that direction – the next step would be to target specific policies to specific outcomes.
This kind of policy shift would bring about much more efficient, less wasteful and less inequitable results. When policies have been decoupled and targeted the need for risk management in the sector then needs to be assessed, including what role governments should play.
In general, successful policy change needs to be well prepared, supported by consultation and evidence-based analysis, and to be accompanied when necessary by adjustment or compensation mechanisms. The OECD contributes to this process by undertaking specific country studies and providing policy advice to member governments.
Greater attention is being given to understanding how OECD policies impact developing and emerging economies - particularly support and protection mechanisms and regulations. Policy coherence needs to be improved so that aid efforts do not merely offset the negative effects of other policies implemented by OECD countries.
OECD Global Forums on Agriculture bring together developed and developing economies to share experiences and explore how policies can more effectively achieve stated government objectives.
See our latest work on:
Analysing agricultural policy reforms options
Monitoring farm support and evaluating policy
Producer Support Estimates (PSE)
Multifunctionality in agriculture