Agricultural subsidies, a mainstay of government policy, have a large part in shaping production and consumption patterns, with potentially significant effects on poverty, food security, nutrition, and other sustainability concerns such as climate change, land use practices and biodiversity. There are multiple types of direct and indirect support provided by governments to various actors in the agricultural sector; and in terms of political economy, there are complex dynamics underpinning the policies that sustain these subsidies.
If subsidies are to be reformed to help promote healthier diets and encourage more sustainable production, it is essential to understand not only the type and amount of support that key countries provide, but also the domestic dynamics that can shape such policies. For subsidies to deliver policy objectives, their design and implementation should delink production from consumption. For example, consumer subsidies designed to deliver nutrition and food security, or payments for environmental services to enable more environmentally friendly production systems, could prove to be the most effective, least trade-distorting means of achieving more sustainable and equitable agricultural production. While the political economy of food means that the removal of subsidies is often highly sensitive, and tends to be met with significant resistance, reform that delinks support from production through a gradual transition process could ultimately prove successful in delivering effective subsidy schemes.
Ultimately, effective subsidy schemes must by design be truly result- and performance-based, supported by robust and objective indicators. At the same time, engaging multiple actors along key commodity value chains – including leading importing and exporting countries, traders and transporters – could lead to the development of international, commodity-specific arrangements that are able to deliver effective nutrition and sustainability goals.