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Environmental Effects Of Trade In The Agricultural Sector: A Case Study

Listed author(s):
  • Runge, C. Ford

Agriculture has been at the center of conflicts over world trade from the beginning in 1986 of the eighth, Uruguay Round, of multilateral trade negotiations. Yet it is only in the final phases of the Round that linkages from trade to the environment have come to the fore. In this paper, the specific linkages from trade to the environment in the agricultural sector are developed. The impacts of trade flows and policies on environmental quality in agriculture have features which make them unusually difficult to resolve. In many respects, the same domestic agricultural policies at the root of trade distortions also encourage environmental damages. Hence, reforming these domestic and trade policies would be a partial, though not a complete, step in the direction of greater environmental benefits. A complete set of policies will require targeted environmental interventions as well. Market failures in agricultural production and consumption have widespread effects on soil, water, human health, and natural ecosystems which are difficult to monitor and therefore to estimate. These market failures are generally reinforced by government policies which distort the prices of agricultural products and inputs (water, fertilizers, pesticides). These distortions occur in agriculture to a greater extent than in many sectors of both developed and developing countries. Trade flows and policies are a direct result of these domestic distortions. This case study will consider market failures with adverse environmental impacts in agriculture and their interaction with failures in agricultural trade policy in developed and developing countries. Section II develops a theoretical perspective on market and government failures in agriculture. In it, a simple model is discussed which emphasizes the distinction between the welfare effects of trade liberalization with and without appropriately targeted environmental policies. Section III provides some concrete examples of trade flows in agriculture and their environmental impacts in developed and developing countries, and analyzes the domestic policies at the root of distortions in agricultural trade. Section IV considers the likely impact of agricultural trade liberalization on market failures with adverse environmental effects, and the need to integrate environmental and trade policy reforms. Section V discusses the relationship between trade and environmental policy instruments in this context, and proposes some principles to guide trade and environmental policy in the agricultural sector. Section VI offers a summary and some proposed guidelines for the agricultural sector.

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Paper provided by University of Minnesota, Center for International Food and Agricultural Policy in its series Working Papers with number 14449.

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Date of creation: 1992
Handle: RePEc:ags:umciwp:14449
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  1. Runge, C. Ford, 1990. "International Public Goods, Export Subsidies, and the Harmonization of Environmental Regulations," 1990: The Environment, Government Policies, and International Trade Meeting, December 1990, San Diego, CA 50876, International Agricultural Trade Research Consortium.
  2. Wolf, Charles, Jr, 1979. "A Theory of Nonmarket Failure: Framework for Implementation Analysis," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 107-139, April.
  3. Taff, Steven J. & Runge, C. Ford, 1988. "Wanted: A Leaner and Meaner CRP," Choices, Agricultural and Applied Economics Association, vol. 3(1).
  4. Just, Richard E & Antle, John M, 1990. "Interactions between Agricultural and Environmental Policies: A Conceptual Framework," American Economic Review, American Economic Association, vol. 80(2), pages 197-202, May.
  5. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-873, August.
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  9. Sullivan, John B., Jr. & Gonzales, Melissa & Krieger, Gary R. & Runge, C. Ford, 1991. "Health Related Hazards Of Agriculture," Staff Papers 13336, University of Minnesota, Department of Applied Economics.
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  16. Binswanger, Hans P., 1991. "Brazilian policies that encourage deforestation in the Amazon," World Development, Elsevier, vol. 19(7), pages 821-829, July.
  17. Munson, Robert D. & Runge, C. Ford, 1990. "Improving Fertilizer and Chemical Efficiency Through "High Precision Farming"," Reports 52687, University of Minnesota, Center for International Food and Agricultural Policy.
  18. Merrifield, John D., 1988. "The impact of selected abatement strategies on transnational pollution, the terms of trade, and factor rewards: A general equilibrium approach," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 259-284, September.
  19. Krutilla, Kerry, 1991. "Environmental regulation in an open economy," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 127-142, March.
  20. Harrison, Glenn W & Rutstrom, E E, 1991. "Trade Wars, Trade Negotiations and Applied Game Theory," Economic Journal, Royal Economic Society, vol. 101(406), pages 420-435, May.
  21. Carlisle Ford Runge, 1987. "Induced Agricultural Innovation and Environmental Quality: The Case of Groundwater Regulation," Land Economics, University of Wisconsin Press, vol. 63(3), pages 249-258.
  22. de Wit, C T, 1988. "Environmental Impact of the CAP," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 15(2/3), pages 283-296.
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