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Linking Agricultural Trade, Land Demand and Environmental Externalities: Case of Oil Palm in South East Asia


  • Othman, Jamal


Reduction of support measures affecting soybean oil in the major soybean producing countries, as a consequence of WTO rules, coupled with rising demand for palm oil in non-traditional palm oil importing countries may lead to pronounced increases in agricultural land demand for oil palm expansion in Malaysia and Indonesia – two main palm oil producing and exporting countries. However, it is expected that the effects on agricultural land demand and consequently impact upon the environment will depend much on existing governance affecting environmental and forestry management in the two countries. Given the relatively more prevalent policy and institutional failures in Indonesia, it is anticipated that deforestation consequences and open burnings in the country will be stronger, inevitably giving rise to recurring haze externalities in the region. This study employed single and multi-country output supply exogenous policy models with explicit factor markets to examine agricultural land demand-trade linkages in the world vegetable oil markets. Shifts in export demand for palm oil and reductions of support measures affecting soybean production were simulated and effects on land use in Malaysia and Indonesia were observed under varying assumptions of environmental and forestry policy regimes in the two countries. Inferences on environmental effects are also provided.

Suggested Citation

  • Othman, Jamal, 2003. "Linking Agricultural Trade, Land Demand and Environmental Externalities: Case of Oil Palm in South East Asia," MPRA Paper 22016, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22016

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    References listed on IDEAS

    1. Edward B. Barbier & Nancy Bockstael & Joanne C. Burgess & Ivar Strand, 1995. "The Linkages between the Timber Trade and Tropical Deforestation—Indonesia," The World Economy, Wiley Blackwell, vol. 18(3), pages 411-442, May.
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    1. repec:spr:agfoec:v:5:y:2017:i:1:d:10.1186_s40100-017-0083-z is not listed on IDEAS

    More about this item


    Agricultural trade and environment; Oil palm economy in Malaysia and Indonesia; Oil palm expansion and haze; Transboundary pollution; Policy failures and environmental impacts;

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development


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