Between Liberalization and Protection: Four Long-term Scenarios for Trade, Poverty and the Environment

The impact of globalization on poverty and the environment was a central issue during the Doha development round table and the mass demonstrations on the streets of Cancun. This paper deals with the complex interaction between agricultural trade regimes, poverty and the environment given two key uncertainties. First, a world where Doha succeeds and globalization proceeds versus a world that moves to regionalism with a stronger orientation toward bilateral and regional trade agreements. Secondly, a world that focuses on economic incentives and economic growth and a limited role for the government versus a world where public and private institutions value also environment and ecology. In our analyses we quantify the impact of trade liberalization on developing countries and the environment. We found that liberalization leads to economic benefits. The benefits are modest in terms of GDP and unequally distributed among countries. Developing countries gain relatively the most. However, between 70 and 85 per cent of the benefits for developing countries is the result of their own reform policies in agriculture. South-South trade liberalization is key to the “development” part of this round. Liberalization can be helpful in gaining welfare; however uncoordinated liberalization can lead to unbearable pressures on the environment. In the liberalizing scenarios most of these shifts occur, indicating that liberalization should be performed with care. Trade liberalization will necessary have environmental consequences, which might be positive or negative for a region. What seems crucial is that environmental and trade agreements and policies must be sufficiently integrated or coordinated, to assure that they work together to improve the environment and attain the benefits of free trade.