Subsidy Reform and Sustainable Development

Political Economy Aspects

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Unsustainable subsidies are pervasive in the industry, agriculture, transport and energy sectors of most OECD countries. They are expensive for governments and can have harmful environmental and social effects. Eliminating these supports requires comprehensive approaches which are supported by top political leadership, transparent in their potential effects on all parties, consistent over the long-term, and often accompanied by transition supports. This volume uses sectoral case studies to illustrate that achieving change in structural policies such as subsidies depends largely on good governance practices.




This paper addresses the political economy of transitional support in the context of subsidy reform in the agricultural sector in the European Union (EU). Agriculture is acknowledged as one of the most protected sectors in many developed country economies. As a consequence, it has proven a sensitive sector within which to seek multilateral agreement on reforms, within the context of the World Trade Organisation (WTO). Nevertheless, acceptance of the desirability of further trade liberalisation in agriculture, as part of a wider package, has gained credence within the European Union (EU) in recent years and this, combined with domestic and budgetary pressures, has given impetus to domestic policy reform within the sector.


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