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Trade Liberalization as a Vehicle for Adapting to Global Warming

  • Hertel, Thomas W.
  • Timothy O. Randhir

Earlier versions of this paper were presented at the International Agricultural Trade Research Consortium Meetings San Diego, CA, December 14-16, 1997 and at the 1st Annual Conference in Global Economic Analysis, Purdue University, June 1998 This study assesses the interaction between climate change and agricultural trade policies. We distinguish between two dimensions of agricultural trade policy: market insulation and subsidy levels. Building on the previous work of Tsigas, Frisvold and Kuhn (1997) we find that, in the presence of current levels of agricultural subsidies, increased price transmission --as called for under the Uruguay Round Agreement on Agriculture-- reduces global welfare in the wake of climate change. This is due to the positive correlation between productivity changes and current levels of agricultural support. Increases in subsidized output under climate change tend to exacerbate inefficiencies in the global agricultural economy in the absence of market insulation. However, once agricultural subsidies have also been eliminated, price transmission via the global trading system contributes positively to economic adaptation under climate change.

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Paper provided by Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University in its series GTAP Working Papers with number 398.

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Date of creation: 1999
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Handle: RePEc:gta:workpp:398
Note: GTAP Working Paper No. 09
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  1. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
  2. Thomas Rutherford, 1992. "The Welfare Effects of Fossil Carbon Restrictions: Results from a Recursively Dynamic Trade Model," OECD Economics Department Working Papers 112, OECD Publishing.
  3. William D. Nordhaus, 1993. "Reflections on the Economics of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 11-25, Fall.
  4. DeVuyst, Eric A. & Preckel, Paul V., 1997. "Sensitivity analysis revisited: A quadrature-based approach," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 175-185, April.
  5. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, June.
  6. Chichilnisky, G. & Heal, G., 1993. "Global Environmental Risks," Discussion Papers 1993_03, Columbia University, Department of Economics.
  7. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
  8. Martin, W. & Winters, L.A., 1995. "The Uruguay Round and the Developing Countries," World Bank - Discussion Papers 307, World Bank.
  9. Arndt, Channing, 1996. "An Introduction to Systematic Sensitivity Analysis via Gaussian Quadrature," GTAP Technical Papers 305, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  10. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-71, September.
  11. Beach, Robert H. & Thomson, Allison M. & McCarl, Bruce A., 2010. "Climate Change Impacts On Us Agriculture," Proceedings Issues, 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart- Hohenheim, Germany 91393, International Agricultural Trade Research Consortium.
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