Changes in the laws that govern international agricultural trade will have major and complex sustainable development impacts. Agriculture and trade in agriculture are economically important for virtually all regions of the world. The highly industrialized economies are overwhelmingly dominant as both exporters and importers of agricultural products, with the U.S. clearly in a leader's position. But the relative importance of agricultural trade to economies in Asia, Latin America and Africa is rising.

Agriculture is also of key environmental importance. Irrigation is the largest single user of water in most countries. Agricultural runoff and seepage of fertilizers and pesticides are major sources of groundwater pollution. Changing patterns of land use, for example from forest to agriculture, can destroy habitat for plant and animal species. Intensive livestock operations in many countries have grown so large that they pose major problems of waste management and disposal, and are sources of air and water pollution.

Changing patterns of trade and production can have social as well as environmental impacts. Falling prices can increase pressures to migrate from farms, affecting the health of rural communities and institutions as well as reducing the human and financial capital available for long-term maintenance of the land.

Agriculture was arguably the subject of the most difficult negotiations of the Uruguay Round. Previously, agriculture had been accorded special status that allowed countries to protect their domestic industries in ways not permitted in other sectors. The Uruguay Round's Agreement on Agriculture was a first step to bringing agriculture under the normal rule of trade law, mandating among other things the capping of farm export subsidies, reductions in both the value of subsidies and the volume of subsidized exports, and reductions in the domestic support provided to farmers. Part of the Uruguay Round's built-in agenda—the ongoing schedule of work mandated in the Agreements—is a review of the Agreement on Agriculture, which began in 1999. Some of the issues this review may address are discussed below.

From an environmental perspective, one of the key areas of interest in the liberalization agenda is subsidies and other forms of support. At the outset, it is important to distinguish between support that distorts production decisions, and support that does not affect production. A subsidy paid for each hectare under cultivation, for example, affects production by encouraging more land to be cultivated. Farm income insurance, on the other hand, is a form of support that has no such undesirable incentives (though some economists argue that any payment to farmers distorts production decisions—even income insurance reduces risks and thus increases expected returns). This type of non-distorting support is termed "decoupled," and is preferred by both economists and environmentalists.

What is wrong with production-linked support? Simply, such support encourages too much production. This intensifies all the environmental problems discussed above. Sometimes it also leads to abandoning traditional sustainable practices such as rotating crops and fallowing fields. The incentives are huge: Western industrialized countries in 1996 poured an estimated $302 billion in support (not all of it production-linked) into the agricultural sector. Other forms of agricultural subsidies artificially lower the prices of inputs, such as water, fertilizers and pesticides, encouraging their overuse.

Agricultural support is also a key development issue. Many developing countries have an advantage in agricultural products compared with their developed country trading partners, but are unable to harness this potential engine for growth. Subsidized exports of surpluses from developed countries depress prices on the international markets, making agriculture a less profitable proposition for those whose governments cannot afford to subsidize.

The commitments made in the Uruguay Round begin to address some of these problems. Developed countries were given six years to cut their average agricultural tariffs by 36 per cent, to reduce their aggregate measures of support by 20 per cent and to cut export subsidies by 36 per cent. Developing countries also are obliged to make cuts in these areas, but theirs are not as large (for many, their levels of support were much lower to begin with), and are stretched over 10 years rather than six. But these cuts still leave agriculture a more protected sector than almost any other; average tariffs remain relatively high at around 40 per cent. And some countries employ "megatariffs" of up to 350 per cent to protect certain products.

Despite reductions in export subsidies and domestic farm programs, the Agreement on Agriculture allows continued support for certain policies designated as falling within the "green box." These include agro-environmental policies with insignificant impacts on production or trade, such as support for research, disaster payments and structural adjustment programs. In addition, the Agreement has exceptions under a "blue box" for direct payments made under production-limiting programs. One of the key issues for future negotiations is the scope of these exceptions. Some countries point out that agriculture is "multifunctional"—that sustainably practiced it not only produces food products, but also protects biodiversity, conserves soil, ensures national food security and so on. They argue that these social benefits should be paid for by the state, and that the resulting support payments belong in the green box. Critics charge that the multifunctionality argument is old wine in new bottles—that countries which did not want to stop supporting their agricultural sector have hit upon a new way to do so.

In a number of countries producers are increasingly using genetically modified organisms in agriculture. Environmental concerns over using GMOs have included, among others, the possibility that the insect- or herbicide-resistant traits of GMOs will spread to other less desirable plant varieties or that they pose unknown risks to human health by containing, for example, allergy- or cancer-causing substances. Others are concerned about GMOs being controlled by a relatively small number of companies and the possible implications for consumers and small-scale agricultural producers, particularly in developing countries. A number of issues could involve GMOs in trade. Conflicts over GMOs could lead to reduced market share if they are stopped at the border by importers. And, the potential disruption of trade flows in agriculture causes problems for less developed countries seeking to use GMOs to explore a potential for enhanced food production. This is an issue that will no doubt be addressed in the coming years, either by the WTO or the Biosafety Protocol of the Convention on Biological Diversity, or both.

5.7 Intellectual property rights