Agricultural trade liberalization, price changes, and environmental effects

Many analyses of agricultural trade liberalization have been undertaken but few have considered the effects on the environment. For the developed countries, reducing the degree of protection would result in less intensive production; therefore, environmental stress would be reduced. A reduction of trade barriers in industrial countries would result in higher world prices and in a somewhat lower world price variability. Assuming initially no policy changes for developing countries, the question is how the liberalization would affect the environment. Higher Prices in developing countries increase the level of production by intensifying production, particularly in the commercial sector, and by an area expansion. Both result in negative environmental effects. These could be partly offset by an increase in hired labor in the commercial sector, which might reduce pressure at the frontier and on marginal lands, as well as by the income effect. These off-setting effects may be small; however, the direction of the overall environmental effects cannot be determined unambiguously without empirical examination. At the global level, the beneficial economic effects of agricultural trade liberalization probably outweigh the expected negative environmental effects in developing countries, but this cannot be unambiguously established without valuation. Copyright Kluwer Academic Publishers 1992