Agriculture and Trade Policy Research in 2023

Agricultural Trade Policy Research in 2023

This policy brief summarises OECD work that was published in 2023 and could inform ongoing discussions related to agricultural trade at the WTO. It covers domestic support to agriculture, transparency and export restrictions, trade integration, and SPS approval procedures.

Risks to global food security continue to accumulate, driven by low economic growth prospects and increased uncertainty related to climate shocks.

In this context, fostering climate adaptation in agriculture is essential.

Trade integration makes countries less vulnerable to negative yield shocks, such as extreme weather events, by mitigating the risk of extreme food prices and stabilising food availability.

The following findings of OECD analysis deserve attention:

Key exporters introduced export restrictions in key commodity markets following Russia’s invasion of Ukraine. Most — but not all — were removed by October 2023.

Processes around the implementation of regulatory measures have the potential to hamper trade.

Environmental measures such as the increasing number of reporting requirements of green-house gas emissions in agri-food supply chains risk fragmenting global agri-food markets in the absence of convergence in reporting requirements.

Governments are scaling up their efforts to help agriculture adapt to climate change. Around 40% of measures take the form of ecosystem-based approaches, infrastructure and technical solutions targeted at finding solutions for farmers and farming systems.

Trade integration makes countries less vulnerable to negative yield shocks

Recent OECD analysis has shed light on how agricultural trade can help address food security concerns resulting

What did we find?

The greater trade integration, the less the risk of high domestic food prices , suggesting that open trade can help stabilise food expenditures. OECD analysis shows that price vulnerability to domestic yield extremes is reduced

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from extreme weather events that have disrupted agricultural markets.

with a higher level of trade integration as this helps cushion the impact of yield shocks on consumers by increasing the flexibility to purchase goods on the international market to offset domestic supply shortfalls.

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On average, trade restrictions increase the extent to which extreme weather events reduce food availability. Figure 3 shows that in most countries the decline in food

availability is more severe where trade is restricted, than where markets are open. This is particularly true for a number of emerging countries and LDCs.

Difference between the Restricted Trade and Integrated Trade scenarios.

Note: OECD countries are shaded in green, the three least developed countries (LDC) aggregates in yellow, the world average in red and the remaining countries in blue. Figure uses semi-variation coefficient of average food availability across the time horizon 2022-2040. Positive values indicate higher vulnerability under the Restricted Trade scenario.

Source: Simulation results.

Export restrictions in key commodity markets remain a concern

Transparency is essential if global food and agriculture markets are to provide affordable food. Transparency on market conditions and policies in food and agriculture markets can help reduce market uncertainty, expose bottlenecks, and highlight risks, all of which in turn help market participants and policy makers to develop more effective responses in times of crisis.

What did we find?

Several key exporters introduced export restrictions following the Russian aggression against Ukraine. Such restrictions not only risk preventing food from being distributed to those in need, but they can destabilise agro-food markets. In addition, uncertainty as to whether and how long export restrictions will be implemented can lead firms and governments to make decisions based

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The OECD is an active contributor to the Agricultural Market Information System (AMIS), an inter-agency platform that supports transparency for the world’s major staple crops (wheat, maize, rice, and soybeans). Its regular update of the database on export restrictions is a major contribution to the AMIS initiative.

on incomplete information, resulting in significant and lasting consequences. The most recent update (which includes export restrictions introduced up to 30 September 2023) shows that several key exporters introduced export restrictions following the war in Ukraine (Figure 2), but that many of them were removed by October 2023.

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Figure 1: Downside variability of national food availability in the case of extreme weather events

Soybeans

Processes around the implementation of regulatory measures have the potential to hamper trade

Approval procedures are critical to Sanitary and Phytosanitary (SPS) systems as they uphold countries’ commitments to facilitate safe trade. However, they can create significant costs and act as non-tariff barriers

What did we find?

Countries have increasingly raised specific trade concerns (STCs) to the WTO on issues related to approval procedures. These STCs are raised on a voluntary basis by Members in the context of the WTO SPS Committee, and the share of STCs related to approval procedures has been consistently high over time, representing on average

if they are not properly administered. The OECD has examined the costs and opportunities associated with the administration of approval procedures.

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35% of the new records of concerns raised each year since 1995. In 2020 this share increased to 75% (i.e. 27 of the 36 STCs raised were related to approval procedures) and in 2021 this share was 63% (17 out of 27) indicating a growing importance of approval procedures for exporting countries (Figure 3).

Figure 2: Export restrictions on wheat, maize, rice and soybeans between 1 January 2022 and 30 September 2023

The existence of an STC related to approval procedures is found to be associated with a trade reduction of 26%, whereas other types of STCs are associated with a 12% trade reduction. Concerns related to approval procedures are found to matter most for food products with an estimated 80% reduction in trade in food products, whereas they do not have a significant impact on animal and plant products.

In a survey conducted among 25 countries, of which 16 were OECD members, “undue delay” and “lack of transparency” are cited as key concerns with respect to countries’ administration of approval procedures. Case studies confirm the relevance of electronic certification and highlight the role of emerging solutions, such as remote audits, in creating efficiencies in SPS systems.

The increasing reporting requirements of greenhouse gas emissions in agri-food supply chains risk fragmenting global markets

The global food supply chain accounts for an estimated one-third of total man-made emissions, with the vast majority due to land use change and farm production. Recent years have seen a strong growth in initiatives undertaken to measure and communicate the environmental impacts of food products, including that of greenhouse gas emissions, water use, and water pollution, as well as the impact on biodiversity.

What did we find?

The proliferation of reporting standards has led to a complex system of reporting for projects, products, and firms with different levels of specificity (Figure 4). The agriculture and food sector faces unique practical challenges in measuring emissions. This is difficult, in part

In addition; the OECD Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems (2022) and the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action (2023) seek to improve and maximise the climate and environmental dynamic of agriculture and food systems.

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because farm production is highly fragmented. Another factor complicating such measurement is that differences in, for example, soils, climate, or weather conditions can affect the level of emissions.

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Figure 3: Evolution of new records of STCs related to approval procedures

Across

Under ideal conditions, the rise of carbon footprint and other environmental impact reporting would herald an era of greater transparency in agri-food supply chains, enabling more sustainable production and consumption choices. Yet this could also lead to unnecessary trade costs, a reshuffling of trade flows, and a reorganisation

of supply chains, with possible adverse consequences on small-scale producers in low- and middle-income countries. This will in particular be the case in the absence of convergence of reporting approaches among stakeholders and if the implementation of reporting approaches is not optimised.

Governments are scaling up their efforts to help agriculture adapt to climate change

Coherent policy packages are essential to meet the triple challenge of providing adequate, affordable, safe, and nutritious food for a growing global population; providing livelihoods all along the food value chain; and doing so while increasing the environmental sustainability

What did we find?

Governments are scaling up their efforts to help agriculture adapt to climate change. The 54 countries covered in Agricultural Policy Monitoring and Evaluation 2023 have adopted close to 600 measures for climate change adaptation in agriculture (Figure 5). Among these, social, economic, and institutional measures, such as adaptation planning, investment in capacity building, the provision of

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of the sector. Crafting these packages requires a deep understanding of existing policies at the national and global levels (see OECD’s annual Agricultural Policy Monitoring and Evaluation, which monitors and evaluates agriculture policies in 54 countries).

climate services, and the creation of financial and insurance mechanisms, are the most prominent, accounting for 61% of all adaptation measures. Other activities, such as various ecosystem-based approaches, infrastructure and technical solutions, account for the remaining 39%. These measures are targeted at finding solutions for farmers and farming systems.

Figure 4: Reporting standards in food supply chains

Effective adaptation of agriculture to climate change, however, requires further actions. Governments should move beyond planning and urgently advance the implementation, monitoring, and assessment of adaptation measures. Policies to strengthen climate change resilience should balance support for short-term recovery from

climate-related shocks with medium-term incremental adjustments to changing conditions, as well as long-term transformative actions when existing systems become untenable. Today, only 19 of the 54 countries covered have in place some form of mitigation target for their agricultural sector.

Most current agricultural support reinforces existing production systems and hinders climate change adaptation. Market price support and other commodityspecific transfers distort production signals, discourage changes in production systems, and create distortions in international markets, which remain a key mechanism to smoothen the impacts of shortfalls or bumper harvests and strengthen the resilience of agriculture and food systems.

Expenditures on R&D, biosecurity, infrastructure and other general services benefiting the sector overall represent a small and declining share of agricultural support. These investments amounted to USD 106 billion in 2020-22, or 12.5% of total positive support, down from 16% two decades earlier. Less than a quarter goes to R&D, extension services and knowledge transfer, which are known to be highly efficient investments with high payoffs for sustainable productivity and resilience, even if the returns may only materialise over the long run.

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Figure 5: Agricultural adaptation actions and programmes

Note: Size of rectangle is proportional to the share of the total number of adaptation actions and programmes identified by the OECD Secretariat, based on information provided by capitals.

Agricultural Trade Policy Research in 2023

What can be done?

• Efforts to increase market and policy transparency need to continue across the entire agro-food sector to avoid or minimise the risks of global food crises, now and in the future.

• Governments should work to capture the potential for trade to mitigate the negative effects of extreme weather events on food prices and food availability by reducing export restrictions in key commodity markets, enhancing the coherence in reporting requirements, and streamlining the recognition of SPS systems equivalence.

• Governments should also invest in targeted interventions that support climate change adaptation and the sector’s transition to more sustainable and resilient agriculture and food systems, and phase out measures that hinder adjustments to production.

Further reading

• Adenäuer, M., C. Frezal and T. Chatzopoulos (2023), “Mitigating the impact of extreme weather events on agricultural markets through trade”, OECD Food, Agriculture and Fisheries Papers, No. 198, OECD Publishing, Paris,

https://doi.org/10.1787/aa584482-en

• AMIS Policy Database (2023)

https://www.oecd.org/agriculture/amis-policy-database/

• Deuss, A. (2017), “Impact of agricultural export restrictions on prices in importing countries”, OECD Food, Agriculture and Fisheries Papers, No. 105, http://dx.doi.org/10.1787/1eeeb292-en

• Deuss, A. and E. Laget (2023), “Sanitary and phytosanitary approval procedures: Key issues, their impact on trade, and ways to address them”, OECD Food, Agriculture and Fisheries Papers, No. 192, OECD Publishing, Paris, https://doi.org/10.1787/35c3fd16-en

• OECD (2020), “The role of transparency in avoiding a COVID-19 induced food crisis”, OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris, https://doi.org/10.1787/d6a37aeb-en

• OECD (2023), Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change, OECD Publishing, Paris, https://doi.org/10.1787/aa584482-en

• OECD (2023), “Carbon Footprints for Food Systems”, Background note for the 2023 Global Forum on Agriculture, Paris.

• World Economic Forum, OECD, Business at OECD (2023), “Emissions Measurement in Supply Chains: Business Realities and Challenges”, World Economic Forum White Paper, November 2023, https://www3.weforum.org/ docs/WEF_Emissions_Measurement_in_Supply_Chains_2023.pdf

This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Member countries of the OECD.

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