Towards a green economy 4 Getting there: Enabling conditions

Despite the clear logic and economic rationale for moving more rapidly towards greener agriculture, the transition will require a supportive policy environment and enabling conditions that could help level the playing field between conventional and green agricultural practices.

Environmental and economic performance in agriculture is most likely to be improved by employing a mix of policies. There needs to be a greater use of regulations and taxes that impose penalties for pollution in order to include externality costs into market prices for these inputs, as well as economic incentives that reward green practices. There are also opportunities for applying market solutions as alternatives to direct regulation, for example, by using tradable permits and quotas to reduce pollution from greenhouse gases and water-borne nutrients. In general, governmental subsidies for farmer (producer) support should be increasingly decoupled from crop production and alternatively be retargeted to encourage farmers’ efforts and investments in adopting green agriculture practices.

In the absence of good governance, collusion and excessive profit taking are constant dangers for incentive programmes. Instilling greater levels of transparency could help reduce such abuses of public-support programmes. In this section we present some of the key conditions that will facilitate a transition to a green agriculture.

4.1 Global policies

At the global level, the enabling conditions are synonymous with improvements to the international trading system and economic development cooperation for promoting sustainable agriculture. An enabling environment for greening agriculture should include a range of interventions at various points along the entire agri-food supply chain:

Elimination of export subsidies and liberalising trade in agricultural products Current multilateral trade policies at the global level have primarily focused on the gradual reduction and removal of national tariff barriers. While such policies aim at facilitating trade, many developing nations are concerned that they are not well positioned to benefit from such trade policies as are the more developed nations.

These concerns are particularly relevant while domestic subsidies and other producer-support programmes

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remain in many developed countries. These measures effectively distort and diminish any competitive advantages that developing nations might have. In addition, subsidies have effectively reduced global commodity prices, making it frequently unprofitable to produce certain products in many developing countries, especially for smallholder farmers. This combination of international trade laws and national subsidies can impede development of commercial agriculture in many developing countries, negatively affecting their efforts to achieve economic growth and poverty reduction.

Such trade and subsidy policies need to be reformed to liberalise trade in environmentally- friendly products and services while allowing developing countries to protect some domestic food crops (special products) from international competition when they are particularly important to food security and rural livelihoods. The World Trade Organisation (WTO) already makes a dispensation for countries with a per capita GDP of less US$ 1,000 (Amsden 2005). Furthermore, agricultural subsidies need to be redirected to encourage more diverse crop production with long-term soil health and improved environmental impacts. A major shift of subsidy priorities is needed in which governments would help reduce the initial costs and risks of farmers’ transition efforts to implement sustainable farming practices.

Market power asymmetry Asymmetric market power in trade is an important issue for WTO competition policy. Leading firms are predominantly located in industrialised countries and maintain significant control over the food system standards and regulatory processes at all stages of the supply chain (Gereffi et al. 2005). In such market conditions, primary producers generally capture only a fraction of the international price of the commodity. Thus, the degree of poverty reduction and rural development benefits of supplying global trade have been limited. A recent study (Wise 2011) shows that even in a resource- rich country like the United States, despite rapid increase in prices for food commodities since 2006, “small-to-mid- scale family farmers had lower farm incomes in 2009 than they did earlier in the decade when prices were lower”. A green agriculture system would require trade policies that redress these chronic asymmetries.

Food safety standards The already stringent food safety standards and verifiable logistics management systems that are