Integrating Sustainability in Agricultural Trade Policies

Agricultural trade moves trillions of dollars worth of food and raw materials across borders every year. Yet the very policies that govern this trade – subsidies, tariffs, export rules, and market access conditions – have for decades been misaligned with the environmental realities the world now faces. Soil degradation, water depletion, biodiversity loss, and rising greenhouse gas emissions are not separate from agricultural trade: in many cases, trade policies are actively driving them. The question today is no longer whether sustainability belongs in agricultural trade policy, but how quickly and how effectively it can be integrated.

The link between trade and environmental outcomes 🔗

According to the FAO, trade and the environment are deeply interconnected. Open markets can improve resource-use efficiency and expand access to cleaner technologies, making domestic production processes more sustainable. But the relationship works both ways. Producing for export can also drive more pollution, deforestation, and greenhouse gas emissions – particularly when trade policies provide no incentive to do otherwise.

The 2030 Agenda for Sustainable Development recognizes international trade as a key driver of inclusive economic growth and poverty reduction. But realizing that potential requires deliberate policy design. Trade policies in food and agriculture can be formulated to address the trade-offs between economic, environmental, social, and health objectives – but only when policymakers treat sustainability as a core criterion rather than an afterthought.

The problem with current agricultural support systems 🔗

One of the most significant barriers to sustainable agricultural trade is the structure of existing support systems. A joint report by the FAO, UNDP, and UNEP found that global support to agricultural producers amounts to around $540 billion per year – roughly 15 percent of the sector’s total production value. Of that, approximately $470 billion, or 87 percent, is price-distorting and environmentally or socially harmful.

These subsidies are not simply inefficient – they are actively counterproductive. They distort food prices, hurt people’s health, degrade the environment, and are often inequitable, placing large agribusiness interests ahead of the 500 million smallholder farmers worldwide. Many of these support measures tie financial benefits to the production of specific commodities or inputs – like chemical fertilizers – which reinforces the very industrial practices that generate the largest environmental costs.

The scale of the problem is growing. By 2030, global agricultural producer support is projected to more than triple to $1.759 trillion. Without structural reform, this trajectory will lock food systems into environmentally destructive patterns for decades.

Why subsidies persist despite the evidence 🔗

Reforming agricultural subsidies is politically difficult. Governments face pressure from powerful agribusiness lobbies, concerns about food price stability, and genuine worries about the livelihoods of farming communities. WTO negotiations on agricultural support have proven deeply divisive, largely due to food security concerns and significant pressure from powerful agribusiness interests. But the case for change is now backed not just by environmental advocates, but by investors managing trillions in assets who view harmful subsidies as a systemic financial risk to global portfolios.

The WTO framework and agricultural trade reform 🔗

The World Trade Organization sits at the center of multilateral agricultural trade governance. The WTO Agriculture Agreement provides a framework for the long-term reform of agricultural trade and domestic policies, aiming to create fairer competition and a less distorted sector – covering market access, domestic support, and export competition.

Progress on the sustainability dimension has been gradual but real. At the 2015 Nairobi Ministerial Conference, trade ministers adopted a historic decision abolishing agricultural export subsidies, contributing to progress on SDG 2.b, which commits governments to correct and prevent trade restrictions and distortions in world agricultural markets. More recently, at the 12th Ministerial Conference in 2022, WTO members adopted a declaration on emergency food insecurity responses, reaffirming their commitment to achieving food security, improved nutrition, and promoting sustainable agriculture and food systems, including resilient agricultural practices.

New windows of opportunity at the WTO 🔗

Despite this progress, there is currently no single forum within the multilateral trading system dedicated to discussing cooperation on trade and sustainable agriculture. The International Institute for Sustainable Development (IISD) identifies three key areas where the WTO can advance sustainability: addressing environmentally harmful agricultural subsidies, improving the environmental performance of food supply chains, and strengthening the resilience of least-developed countries to food insecurity shocks.

Current WTO disciplines were designed at a time when agricultural markets were characterized by production surpluses and long-term declining prices. Today, the main challenges relate to supply chain disruptions, high prices, excessive volatility, and resource scarcity – realities that demand updated rules and frameworks.

The Trade and Environmental Sustainability Structured Discussions (TESSD), launched at the WTO in November 2020, offer a promising new avenue. Its work programme has identified agriculture and environmentally harmful support measures as a key focus, and the broader initiative provides space to address sustainable supply chains and related challenges.

Voluntary sustainability standards: a growing force in trade 🔗

Beyond formal multilateral agreements, voluntary sustainability standards (VSS) have emerged as an increasingly important mechanism for embedding environmental and social criteria into trade. These standards – mostly designed by NGOs or private firms – have expanded to include 300 to 500 standards globally and are most prominent in value chains for tropical agricultural commodities like bananas, cocoa, coffee, cotton, palm oil, soy, sugarcane, and tea, which are often exported from developing nations.

Countries are progressively integrating these standards into their market access regulations and trade policies. Governments are increasingly recognizing the importance of VSS, with various countries already integrating these standards into market access regulations, trade policies, public procurement, and export promotion measures. India’s Good Agricultural Practices certification, for instance, benchmarks local smallholders against global standards – reducing compliance costs while opening export pathways.

Challenges for developing countries 🔗

While VSS create market opportunities, they also create barriers. Smaller producers, particularly those in low-income countries, often struggle to afford the cost of multiple certification schemes. Concerns have been raised about the proliferation of different government regulations and private standards, the lack of international harmonization, and the high cost of multiple inspection, certification, and accreditation requirements.

Core environmental standards must be accompanied by appropriate support for smallholder farmers, especially in the global South, including financial support, training, and knowledge sharing. Without this, sustainability requirements in trade risk becoming non-tariff barriers that exclude the most vulnerable producers rather than lifting them up.

Environmental provisions in regional trade agreements 🔗

While multilateral progress at the WTO has been slow, regional trade agreements (RTAs) have become an important vehicle for advancing the trade-sustainability agenda. Environmental provisions have increasingly been included in bilateral and regional trade agreements, and while the number of RTAs being signed is declining, the number of environmental provisions per agreement is on the rise.

A recent OECD stocktake found that 130 trade-related measures to address environmental issues in agriculture were identified across 15 OECD member countries and the EU between 1997 and 2024, with over half of these measures introduced between 2020 and 2024. This rapid acceleration signals that governments are moving from commitment to concrete policy action.

The European Union’s mandatory due diligence requirements for deforestation-free supply chains are among the most prominent recent examples. This measure has been widely cited as a signal of policy coherence, sending a strong message to exporters about the environmental expectations embedded in market access.

Sustainable productivity growth as a trade policy goal 🔗

One of the most important concepts connecting sustainability with trade is sustainable agricultural productivity growth – the idea that producing more from available land and resources should happen in ways that simultaneously reduce environmental costs. Sustainable agricultural productivity growth aims to improve food security and nutrition, alleviate poverty, conserve natural resources, mitigate climate change, and build more resilient and inclusive food systems – meeting the needs of both current and future generations.

This matters for trade policy because export competitiveness and environmental performance are not inherently at odds. Governments in many countries are elevating their environmental goals for the agriculture and food sector, including net zero greenhouse gas emission targets and zero biodiversity loss commitments. Trade policies that reward cleaner, more efficient production practices – rather than simply rewarding volume – can align commercial and environmental incentives in ways that benefit both producers and the planet.

Repurposing support: the path forward 🔗

The evidence is clear that integrating sustainability into agricultural trade policy requires more than new standards or voluntary schemes – it demands a fundamental repurposing of how governments support agriculture. Reconfiguring agricultural producer support, rather than eliminating it, can help end poverty, eradicate hunger, achieve food security, improve nutrition, promote sustainable agriculture, foster sustainable consumption and production, mitigate the climate crisis, restore nature, limit pollution, and reduce inequalities.

The need for trade policies to proactively deliver for sustainable agriculture has been reaffirmed at the highest political level – through the Leaders’ Declaration on Forests and Land, signed by 141 countries at COP26 in Glasgow, and the Forests, Agriculture and Commodity Trade Dialogue, supported by key global exporters and importers. At the global level, the Kunming-Montreal Global Biodiversity Framework’s Target 18 calls for the elimination or repurposing of at least $500 billion in subsidies harmful to biodiversity by 2030.

Achieving coherence between trade and sustainability objectives will require multilateral cooperation, not just unilateral action. In a globalized economy dominated by highly integrated supply chains, addressing transboundary challenges requires coherent policy approaches across jurisdictions – because measures designed to remove perverse incentives or foster trade in environmentally preferable products are far more effective when applied collectively.

What do you think? As agricultural trade rules are renegotiated and sustainability standards become market requirements, who bears the greater responsibility for financing the transition – wealthy importing nations that set the standards, or the exporting countries that must meet them? And can trade policy realistically serve as a driver of environmental change when so much of the current system still rewards volume over ecological performance?

References

1. https://www.fao.org/markets-and-trade/areas-of-work/trade-policy-and-partnerships/trade-and-sustainable-agrifood-systems/en
2. https://www.fao.org/newsroom/detail/un-report-on-agricultural-supports/en
3. https://www.unep.org/news-and-stories/press-release/un-report-calls-repurposing-usd-470-billion-agricultural-support
4. https://news.un.org/en/story/2021/09/1099792
5. https://www.ids.ac.uk/publications/trade-policy-for-sustainable-and-inclusive-agriculture-accessible-version/
6. https://www.wto.org/english/tratop_e/agric_e/agric_e.htm
7. https://www.wto.org/english/tratop_e/agric_e/food_security_e.htm
8. https://www.wto.org/english/tratop_e/agric_e/negoti_e.htm
9. https://www.iisd.org/articles/policy-analysis/fostering-cooperation-sustainable-agriculture-trade-wto
10. https://tessforum.org/latest/how-the-wto-can-help-foster-cooperation-on-sustainable-agriculture-and-trade-2
11. https://unctad.org/news/sustainability-standards-trade-how-can-developing-countries-benefit
12. https://www.wto.org/english/tratop_e/envir_e/envir_req_e.htm
13. https://www.oecd.org/en/topics/sub-issues/trade-and-environmental-sustainability.html
14. https://www.oecd.org/en/publications/trade-related-measures-linked-to-the-environmental-sustainability-of-agriculture_ebfdca09-en.html
15. https://www.usda.gov/about-usda/general-information/staff-offices/office-chief-economist/sustainability/sustainable-productivity-growth-coalition/sustainable-agricultural-productivity-growth-what-why-and-how
16. https://www.oecd.org/en/topics/sub-issues/sustainable-agriculture-and-trade.html