Multifunctionality: Concepts and Applications to the WTO Negotiations on Agriculture

The ongoing negotiations in the WTO will most certainly lead to a further liberalization of the global agricultural trade. Related to this, many national governments, including Norway, Switzerland and Japan have placed substantial emphasis on the so-called non-trade concerns. In addition to the production of food and fiber, agriculture also provides or may provide national food security, environmental benefits, and viable rural areas. The term "Multifunctional Agriculture" has been applied to describe these additional functions. In this paper, we will show how the economic concepts of "positive and negative externalities" and "public goods" can be used to analyse non-trade concerns and multifunctionality, especially with reference to agriculture's impact on the environment. We conclude the paper with suggestions for international trade rules that can allow countries to meet domestic environmental policy objectives in a minimally trade-distorting manner