Aligning Competitiveness and Sustainability: How Border Adjustments Can Strengthen the EU’s Agricultural Policy

EU policies promoting higher environmental standards in agriculture are often perceived as a challenge to the sector's economic competitiveness. However, well-designed policies can align the EU's environmental and economic goals, fostering sustainable and inclusive growth. This policy note examines the case of pesticide-reduction targets and finds that competitiveness trade-offs can be mitigated through complementary trade measures. Our analysis highlights that 44% of pesticide use embedded in EU agricultural consumption comes from imports, despite them representing only 16% of the consumption. Particularly striking, a substantial amount of the pesticide use embedded in imports is represented by banned pesticides, exposing a blind spot in current trade policies. Without appropriate safeguards, stricter EU pesticide regulations can shift production to less-regulated markets, undermining global pesticide reduction efforts while disadvantaging EU agriculture. Analysing the potential for policy solutions, we consider different border-adjustment mechanisms, drawing parallels with the Carbon Border Adjustment Mechanism (CBAM). Our findings indicate that such measures preserve EU agricultural competitiveness without compromising on environmental ambition. Aligning trade and environmental policies is therefore not only feasible but essential for effectively reducing global pesticide use while safeguarding EU agriculture.