This paper attempts to clarify the significance and limit of discussing multifunctional aspects of agriculture for international trade policy using an OECD analytical framework. In general the environmental concern like nitrate pollution is thought of as a factor to legitimate an agricultural trade liberalization in the international debates and negotiations. The existence of positive externality by agriculture, however, could support an intention of protecting a domestic agriculture rather than tapping an internal market.
The externality has been conceptualized as‘multifunctionality’at the OECD workshop conference in 2001.
The conference showed the analytical framework of modeling the multifunctional issue as a market failure problem. Furthermore, the conference proposed the operational threefold examination of checking jointness, externality, and public goods character to discuss an applicability of a tariff measure. The participants eventually concluded a new agenda that multifunctionality should become an additional element for designing internal and external agricultural policies.
An existence of multifunctionality wouldn't always guarantee a domestic protection against the world market. First of all, the above threefold examination should be perfectly passed. If the first two conditions can be satisfied and the third condition is not supportive, the conclusion may recommend the market creation to stimulate voluntary transaction of multifunctional goods.
Additionally it would be required that the marginal social value of multifunctionality is so large relatively compared to border difference of product price. We need more empirical economic studies to evaluate the marginal value of multifunctionality.
The jointness of multifunctionality with agricultural production is also an important condition for determining the measure of supporting domestic agriculture. There are two types of jointness, namely either jointness with agricultural production or agricultural land. Import tariff would be advisable when the production jointenss is proven. On the other hand, de-coupling direct payment scheme should be selected when the land jointenss is observed.
