Policy concerns over the environmental effects of arable crop farming (grains, rice and oilseeds) have increased over the last two decades, due largely to more intensive use of land; and a rise in the value placed on many environmental services provided by agriculture...

Over the last two decades, trade and environment issues in agriculture have gained increasing prominence at international and national levels alike. At the global level, this interest is principally expressed in the on-going WTO negotiations and the UN World Summit on Sustainable Development, whilst at the micro level, local government and agencies are concerned the impacts of policies on production and trade, as well as on the local environment...

The arable crop sector occupies approximately one-third of the OECD’s Utilised Agricultural Area (UAA),1 and contributes to around a half of the OECD’s total agricultural output. China, the United States, the European Union (EU), Russia, Argentina, Australia and Canada are the world’s main cereal producers. The OECD countries are responsible for approximately 80% of world cereal trade...

With the widespread intensification of arable farming, environmental consequences have become apparent throughout the OECD area. Such environmental impacts include damage to, and removal of, soil thereby threatening agricultural sustainability, and water pollution. Modern arable systems also impact upon biodiversity within the system itself, and on associated non-cropped habitats such as grassland, field boundaries and watercourses, as well as on the aesthetic quality of the arable landscape...

Agricultural support and environmental policies have evolved over time. Shifting government priorities, domestic budgetary pressures and the implementation of multilateral, regional and bilateral trade agreements have impacted on the agricultural policy of OECD member countries. These changes range from limited re-instrumentation, to comprehensive reform which has had particular consequences for the arable crop sector.1 In a number of OECD countries both the number and complexity of policy measures are increasing, as the centre of gravity of policy measures shifts gradually from traditional market price support and output-related measures towards sector-wide and non-commodity-specific policies, particularly those encompassing environmental and rural development concerns...

Concerns about the effects of agriculture on the environment have intensified in OECD countries over the past two decades, particularly in the areas of water pollution, soil degradation, loss of biodiversity and landscape features. Reducing the harmful and enhancing the beneficial effects of agriculture on the environment has become a widely accepted policy objective. A wide range of agri-environmental measures has been adopted in order to address the environmental performance of agriculture, although many have been put in place to offset the environmental impacts of traditional agricultural support policies...

The environmental effects of agricultural production in developed countries have already been extensively documented in the literature.1 In many areas, the environmental consequences discussed in the previous chapter are the result of several decades of accumulation and environmental loadings may have been high for some time before public concern was raised.2 In other cases, degradation of marginal land and of landscape, retreat of indigenous species from particular areas, or serious groundwater pollution have occurred relatively recently and with alarming rapidity. In the last 15-20 years, awareness of the full extent of these problems has increased throughout the OECD area. Governments are now responding to public pressure – and in some cases taking the lead – in seeking ways of containing or reversing these trends...

The URAA marked an historic point in the reform of the agricultural trading system (OECD, 2001f; Diakosavvas, 2004). The URAA imposed disciplines on trade-distorting domestic policies, and quantitative constraints were agreed for market access, domestic support and export subsidies. Notwithstanding the progress that has been made in liberalising agricultural trade, the level of support to producers of certain arable crops remains high. In many OECD countries, there is a wide range of agricultural and trade policies that affect the arable crop sector – domestic support, import tariffs and export subsidies...

The new and more comprehensive agri-environmental programmes discussed in Chapter 4 raise questions about the possible negative effects on trade, including arable crop imports and exports. It is theoretically sound and permissible under current trade rules to pursue such agri-environmental policy interventions (Anderson, 1992; Ervin, 1999). Indeed, correcting for missing environmental markets (i.e. positive and negative externalities and public goods) or reducing government policy distortions improves social welfare. However, the choice of approach adopted for making the corrections and reducing the distortions is critical. Agri-environmental programmes, if not designed and implemented in cost-effective ways, may lead to losses in national and/or global welfare. Hence, an examination of their effects on production and trade, and of ways to improve their efficacy is warranted...