Multifunctional agriculture, non-trade concerns and the design of policy instruments: applications to the WTO agricultural negotiations

This article focuses on how to achieve non-trade concerns (NTC) and multifunctional goals that countries may have with minimal trade-distortion. The term 'multifunctional agriculture' focuses on the issue that agriculture, in addition to the production of food and fibre, also may provide national food security, environmental benefits and viable rural areas. The article claims that multifunctionality hardly can justify the use of market support while it may justify budget support. It is argued that just as a tax is widely accepted as the optimum policy for a negative externality, so should the use of a production-related subsidy or payment be accepted as optimum policy for a positive externality or public good that is produced jointly with or complementary to agricultural production. The article concludes with suggestions for WTO agricultural trade rules to prevent such policies from becoming a form of protectionism.