Agricultural trade liberalisation and the environment: a global perspective

Abstract

Numerous empirical studies have been undertaken in recent years on the extent to which government policies distort incentives to produce and consume farm products, and on the trade and economic welfare consequences of those distortions or their liberalisation (e.g. OECD, 1987 and 1990a; Parikh et al., 1988; Stoeckel et al., 1989; and Tyers and Anderson, 1992). Those studies show clearly that policies of rich countries tend to assist farm sectors with food import barriers and production and export subsidies, that policies of poorer countries tend to discourage farm production, and that both sets of policies reduce economic welfare as conventionally measured. Such studies however, typically say little or nothing about the effects of agricultural policies on the natural environment, and so account for less than the full effects of those policies on social welfare. Neither do they examine environmental policies as part of the package of governmental interventions that are affecting (or could be introduced to affect) agricultural production, consumption and hence trade and welfare. This paper seeks to help redress that imbalance by addressing the question: how would agricultural trade liberalisation by one or more groups of countries affect the natural environment, and hence economic welfare, broadly defined to include not just the consumption of marketed goods and services but also the utility which society derives from the environment?