Making the most of the trade and environment nexus in agriculture

Key messages

• Government support to agriculture remains high at USD 842 billion per year in 2022-24, but continues to decline relative to the sector size.

• In the three decades since the WTO Agreement on Agriculture was established, the value of global agro-food exports have grown nearly fivefold, with growth in agricultural trade outpacing production growth. However, low investments in innovation have not been sufficient to reverse the slowing trend in agricultural productivity growth.

• Countries increasingly use trade-related measures to address environmental concerns and to mitigate the sector’s GHG emissions. However, the diversity of approaches may increase trade costs and reduce the effectiveness of these measures. Regulatory co-operation by governments can lead to better results.

• Reforms are needed to reduce market distortions, foster global food security, improve farmers’ livelihoods and achieve tangible environmental benefits

What’s the issue?

Government support remains a major feature of the agriculture sector. The OECD Agricultural Policy Monitoring and Evaluation report estimates government support to agriculture and analyses policy development in 54 countries. Findings of the 2025 report highlight the continuing prevalence of market price support (MPS) arising from measures that change the price farmers receive for their products such as tariffs and other border measures, and of budgetary transfers, such as direct payments based on land, input subsidies, payments for environmental services, nutrition and feeding programmes for consumers or investments in infrastructure development and other services for the sector.

Transfers to the sector are higher than before the COVID pandemic. Total support to the agricultural sector across the 54 countries covered by this report averaged USD 842 billion per year during 2022-24. This is 21% above the average seen in the decade before COVID (USD 697 billion) and equivalent to 18% of the sector’s production value. Higher consumer subsidies make up a notable share of this increase, though support to producers is also higher in the post-pandemic period. This increase in support levels is more pronounced in the covered emerging economies (37% higher) than it is across the OECD (5% higher).

Producer support is declining relative to the value of agricultural production. In 2022-24, support directed at farmers accounted for 9% of gross farm receipts (GFR), down from 18% in 2000-02. Nevertheless, certain commodities such as rice, sugar, maize, and milk continue to receive significant market price support, contributing to enduring distortions in global trade flows and hindering competition.

Investments in agricultural knowledge and innovation systems have also declined relative to the size of the sector: estimated at 0.54% of the sector’s production value, they are barely more than half what they were in 2000-02. This evolution is particularly worrying in emerging economies and urgently needs to be reversed to address slowing productivity growth.

A large share of support is still delivered in forms considered potentially most distorting of production and trade. Most support (USD 624 billion on average between 2022-24) is aimed at individual producers, with over half of this total (USD 334 billion) arising from MPS policies that lift domestic prices above world prices. MPS, output support and support based on variable input use without constraints are considered potentially the most market distorting.

Most support continues to be provided without requirements for recipients beyond existing environmental regulations. In many countries, government support to agriculture is conditional on meeting environmental requirements. In 2022-24, 17% of support to farmers was delivered subject to compliance with existing regulations. This share has increased from 12% in 2000-02. Just 5% is offered for voluntary environmental actions that go beyond basic regulatory requirements, unchanged from the early 2000s. Tying support to increased effort to improve sustainability can improve the sector’s environmental performance, although details in the programme design and implementation matter.

Trade of agricultural and food products has expanded and evolved, adapting to economic and geopolitical challenges. Trade growth has outpaced production growth, and agriculture is increasingly integrated into global value chains, with many products now crossing borders multiple times before reaching consumers. While overall levels of trade protection have been declining, including through a growing number of trade agreements, agro-food products continue to face higher tariffs and quantitative restrictions compared to other sectors, along with a greater incidence of non-tariff measures which may have trade limiting effects.

The use of trade-related measures to address environmental concerns is increasing. Over the past three decades, attention to the environmental sustainability of agriculture and food systems has grown in many countries covered by this report, and trade-related measures are increasingly becoming part of the policy mix to address environmental concerns. A growing number of these measures specifically refer to agriculture or food systems: of 130 such measures applied or approved by OECD Members between 1997 and 2024, 60% were introduced after 2018. An increasing number of trade agreements is also engaging with voluntary sustainability initiatives, which are more prevalent in agro-food supply chains than in other sectors. Emerging trade agreements are also beginning to include provisions or dedicated chapters on sustainable food systems. Governments have introduced a wide array of climate change mitigation policies, some of which have explicit or implicit links to trade due to their design or sectoral focus. Nearly half of the 120 trade-related mitigation policies identified in the OECD Agriculture Policy Monitoring and Evaluation Report 2025 target agricultural sectors that are export-oriented.

Why is this important?

Slow reform has implications for productivity and food security. The combination of insufficient public investment in innovation and persistent market distortions increases pressure on global food systems. Slowing productivity growth in many countries hampers progress toward shared policy objectives, including enhancing farm income, improving environmental performance, and strengthening food security. Public investment in innovation remains a critical lever for reviving productivity growth. The total amount of positive support provided in 2022-24, USD 842 billion per year, shows that governments are willing to provide substantial resources to their agricultural sectors. Reforming, reorienting and optimising this support could foster a more productive, resilient, and sustainable agricultural sector.

The growing use of trade-related measures linked to environmental objectives brings opportunities and challenges. There is a potential tension between crafting policies that are tailored to local contexts and creating unnecessary trade barriers as multiple approaches emerge. The growing number and diversity of trade-related initiatives for environmental sustainability and GHG mitigation identified illustrate the complexity of the links between trade and the environment and of the broader sustainability governance landscape. Small farmers and those in developing countries, in particular, can be affected by the large number of measures and their lack of harmonisation, as they may struggle to deal with rising compliance costs. Regulatory co-operation that results in the mutual recognition or convergence of trade-related measures could help reduce non-tariff barriers and trigger better outcomes in terms of both trade and environmental objectives.

What can policymakers do?

• Reform and reorient – including phasing out where possible – the most distorting forms of support.

• Reduce income support measures with low transfer efficiencies and prioritise targeted and tailored mechanisms that deliver direct benefits to farmers.

• Invest more in targeted innovation and sustainable productivity growth and improved understanding of the impact of agricultural practices and support policies on the environment.

• Promote broad approaches to resilience that ensure preparedness along with risk management systems that respond to OECD’s established risk management framework.

• Promote environmental protection and the mitigation of negative environmental impacts, balanced with open and transparent agro-food trade to address the triple challenge facing agriculture and food systems.

Further information

OECD (2025), Agricultural Policy Monitoring and Evaluation 2025: Making the most of the trade and environment nexus in agriculture, OECD Publishing, Paris, https://doi.org/10.1787/a80ac398-en.

Contact

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