"Norway, Switzerland, the European Union, Korea, Japan and some other countries
place substantial emphasis on the so-called non-trade concerns in the ongoing WTO
negotiations on further agricultural trade liberalisation. In addition to the production of
food and fibre, agriculture also may provide national food security, environmental
benefits, and viable rural areas. The term “multifunctional agriculture” has been increasingly
applied to describe these additional functions. This working paper focuses
on how to achieve the multifunctional goals that nations may have with minimal tradedistortion.
In this study, the economic concepts of externalities and public goods are
used to analyse non-trade concerns and multifunctional agriculture. It is argued that
just as a tax is widely accepted as the optimum policy for a negative externality, so
should the use of a production-tied subsidy or payment be accepted as optimum policy
for a positive externality or public good that is produced jointly with or complementary
to agricultural production. The study concludes with suggestions for international trade
rules to prevent such policies from becoming a form of protectionism"