Environmental Regulations and Agricultural Competitiveness

The cost of meeting environmental regulations can be a critical factor in determining the competitiveness of a product, since the cost advantages of producers in one country are often very slim. The existence of negative externalities means that prices are lower than would prevail if all costs where included in the prices of the products. Additional costs associated with new regulations have an effect on the continued importance of a country's agricultural exports. Governments often assist their agricultural sectors in overcoming the disadvantages through subsidies, tax breaks, technical assistance or other means. This assistance increasingly takes the form of green payments, which are currently exempt from the WTO limits imposed on domestic subsidies. Competitiveness can be either enhanced or diminished by the environmental regimes of competing nations