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This paper analyzes the effects of developed-country agricultural subsidies on the environment and on poverty, particularly in developing countries. It highlights the movement toward developed-country subsidy reduction and proposes a policy reform agenda to help developing countries capitalize on these reductions and turn their agriculture sectors into vehicles for sustainable development.

Agricultural subsidies are among a number of factors determining whether and how agriculture can help the poor and protect ecosystems. Reforming the current agricultural subsidies system in developed countries, a central goal of the Doha Round negotiations of the World Trade Organization, provides an opportunity to generate a number of positive impacts:

• For poor farmers in developing countries whose ability to compete is hampered by subsidy-driven overproduction in rich countries;
• For taxpayers and consumers in developed countries faced with rising deficits;
• For the environment in developed countries where subsidies contribute to ecosystem degradation; and
• For the environment in developing countries, where poverty is one driver of environmental degradation.

An agreement to reduce subsidies at the international level, however, does not guarantee that the poor and the environment will benefit—this requires the implementation of strategic domestic policies in developing nations. This white paper proposes a reform agenda that developing country governments and development organizations can build from to ensure that the poor and the environment are able to benefit from changes in international trade policies. The reforms outlined in this paper are “no regrets” policies that can help make agriculture pro-poor and pro-environment, regardless of the outcome of the Doha Round.