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Trade Liberalization as a Vehicle for Adapting to Global Warming

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  • Hertel, Thomas W.
  • Timothy O. Randhir

Abstract

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.

Suggested Citation

  • Hertel, Thomas W. & Timothy O. Randhir, 1999. "Trade Liberalization as a Vehicle for Adapting to Global Warming," GTAP Working Papers 398, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    • Handle: RePEc:gta:workpp:398
    Note: GTAP Working Paper No. 09
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    References listed on IDEAS

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