International Subsidy Rules
The broad goal is to develop proposals for international subsidy rules that help define both harmful and non-harmful subsidies.
The Challenges
Many subsidies have undermined livelihoods and fuelled environmental degradation...
As an example, the production of crops like sugar and rice in Southern Europe is supported by a wide range of subsidies, leading to over-production and artificially cheap exports. These subsidies undermine the livelihoods of farmers in developing countries, and encourage the over-use of inputs such as water with negative environmental impacts such as dropping of water levels and blocking the natural inflow of water, sediments and nutrients, in for example the internationally important wetlands of Donana National Park in Spain.
… but not all subsidies are bad
When properly designed and applied, some subsidies could support the alleviation of poverty and the provision of essential ecosystem services. They can also spur innovation, such as in renewable energy technologies.
However, subsidies will generally not be only “good” or only “bad”, because they will (directly or indirectly) impact not only on their objectives. Subsidies to liquified petroleum gas (LPG) in Senegal illustrate this. These subsidies have resulted in considerable savings of fuelwood and charcoal, relieving pressures on local forests and reducing air pollution. However, it has mainly benefited the better-off parts of society as the LPG is not distributed outside big cities. The subsidies come at a significant cost to the Senegalese treasury, thereby making fewer funds available for the rural poor. Thus, in many cases, it will be far from clear whether a subsidy has an overall positive effect or not – because the impacts (in this case on deforestation, air pollution and inequality) are not comparable.
The need to reform WTO rules
The only binding international rules on subsidies are those of the WTO. They focus narrowly on subsidies’ formal characteristics (cf. the rules contained in the Agreement on Agriculture) or their impacts on export markets. They do not attempt to channel subsidies so that they would deliver in a more focussed manner on their legitimate objectives.
WWF therefore believes that current WTO rules cannot ensure that the right balances are struck when assessing harm and benefit of a subsidy. Often, they turn a blind eye to harm of concern to the international community, while at other times they constrain unduly WTO Members’ possibility to use subsidies.
We need to ask how economic instruments such as subsidies can best be applied to address the various global challenges that we are facing, such as the immediate needs of people living in extreme poverty, whilst simultaneously considering long-term impacts upon the environment?
The challenge for policy makers is to rationalise categories of allowable subsidies and to tighten the criteria for their application to ensure that they support sustainable development. This involves finding ways to distinguish between beneficial and harmful subsidies and should include full consideration of their impacts, particularly on developing countries. It also demands an approach to addressing powerful lobbies that defend environmentally unsound subsidies.
What we do
WWF is working in collaboration with leading international development agencies and NGOs, think-tanks and universities from developing countries to find new ways to design international subsidy rules.
