Including non-trade concerns: The environment in EU and US agricultural policy

The challenge for any trade agreement is to be adaptable enough to enable countries to address legitimate non-trade concerns (NTC) while being restrictive enough to limit harm to other countries and to assist the creation of free international markets. In this paper, we focus on how environmental NTC have been addressed in agricultural policy in the USA and the European Union (EU) and the resulting implications for trade agreements. For example, programmes in the USA discourage production on environmentally sensitive land, while the EU encourages extensive production. While these and other differences will affect production and trade, the different approaches to agri-environmental policy affect the degree to which the two regions can use agri-environmental policy to offset commodity payments. This difference in flexibility will, in turn, affect how easily the two regions can accept a trade agreement that mandates greater reductions in trade-distorting price supports.