Tendering conservation contracts: Should information on environmental benefits be disclosed or concealed?

Resource /Energy Economics and Policy,

Enlargement of the European Union: A movement towards the optimal trade bloc size?

This paper analyses how the enlargement of a trade bloc will affect national welfare. We establish a partial equilibrium model of a trade bloc either operating as a monopoly with a competitive fringe or facing a duopolistic game in production taxes/subsidies. Given this framework, we demonstrate how member countries’ welfare effects depend on their trade flow and the market power of the trade bloc. A numerical estimation of the effects of EU enlargement on the major grain crop markets suggests that welfare effects are negligible. Economic reasons are therefore unlikely to be a motivating force for further enlargement.trade bloc, trade liberalisation, game theory, European Union, International Relations/Trade, D42, F11, Q17, Q18,

National Differences in the Uptake of EU Agri-environmental Schemes: An Explanation

The number of agri-environmental programs launched under EU Regulation 1257/99, as well as the share of agricultural land covered under these programs, varies significantly between EU member states. National differences in the uptake of agri-environmental schemes would be economically efficient if they accounted for differences in countries' natural capacity to assimilate pollution and reflected the social value attributed to environmental quality. However, political decisions are unlikely to be influenced only by efficiency consideration. This paper assesses the distributional, budgetary and welfare effects of agri-environmental programs and analyses how this may explain the pattern of agri-environmental policy in Europe. The study is based on an environmental externality model which accounts for a country's economic, environmental and political situation. The conceptual analysis is supplemented by a regression model. Theoretical results suggest that the extent of agri-environmental programs increases as 1) the importance attributed to farm income increases; 2) the costs for the implementation of agri-environmental programs are lowered; 3) environmental benefits are valued higher; 4) the national budgetary pressure decreases; 5) the share of EU co-funding for agri-environmental schemes is raised. Empirical results indicate that countries attributing a high weight to farm income are more likely to implement agri-environmental schemes than others. The uptake of agri-environmental programs is higher the more important the role of landscape features for the domestic tourist industry. On the other hand, the uptake of agri-environmental policy is negatively correlated to land productivity and depends also on countries' wealth and their relative contribution to the EU budget.Environmental Economics and Policy,

Enlargement of Trade Blocs: National Welfare Effects If Trade Is Liberalized

Small countries may benefit from the formation of a trade bloc, since their combined market power will enable them to manipulate the terms of trade. The question of interest is whether countries will benefit from the enlargement of a trading bloc, if trade liberalization induces countries to substitute domestic support measures for conventional border protection. The paper deals with this question by analyzing the conditions for positive welfare effects resulting from the enlargement of a trade bloc. Based on a partial equilibrium trade model, we consider a game in production taxes/subsidies between two trade blocs. The tax/subsidy instrument may capture the production effect which can be induced by a combination of environmental, health or safety rules. The paper demonstrates that national welfare effects from the enlargement of a trading bloc depend crucially on a member country's net trade flow and the relative market power of the trade bloc. The theoretical analysis is supplemented by a numerical analysis estimating the potential welfare gains of EU enlargement on the major grain crop markets. Based on the scenarios that the EU operates either as a monopoly or competes with the rest of the world within a duopoly, upper and lower bounds of potential welfare effects resulting from enlargement are estimated. The results suggest that welfare effects on the major European grain markets are very small in proportion to the total production value. We thereby conclude that political reasons are likely to remain the main motivation for further EU enlargement.trade bloc, trade liberalization, game theory, European Union, International Relations/Trade, D6, F11, Q17, C7,

Agricultural multifunctionality and trade liberalisation

This paper employs a partial equilibrium trade model to analyse the interaction of trade and environmental policy in the context of agriculture’s multifunctionality. We formally demonstrate that free trade is suboptimal if no efficient environmental policy addressing the provision of multifunctional benefits is in place. However, tariff reductions in a large net-importing country reinforce the incentive for that country to introduce environmental policy, though this policy will be strategically distorted to partly substitute for the tariff. Despite its strategic character, this environmental policy programme will unambiguously enhance global welfare if it is introduced in conjunction with tariff reductions. We conclude that, although the multifunctionality argument may lend some support to the criticism of trade liberalisation, the argument is not solid when trade liberalisation induces the introduction of environmental policy.agricultural trade, agricultural multifunctionality, strategic environmental policy, welfare economics

AGRICULTURAL TRADE LIBERALIZATION AND STRATEGIC ENVIRONMENTAL POLICY: A FORMAL ANALYSIS

This paper develops an extended general equilibrium model of international trade in order to analyze the welfare effects of agricultural trade liberalization if a large country influences its terms of trade by means of environmental policy. We derive globally optimal first-best and second-best environmental and trade policy combinations as a benchmark for assessing the trade-distorting character of strategically motivated environmental policies and demonstrate that if second-best rather than first-best policies are chosen as a benchmark the conclusions may differ not only in magnitude but also in direction. We further demonstrate that if a Pigouvian instrument is transformed into a strategic environmental policy, following trade liberalization, the global welfare effect is unambiguously positive. We thereby prove that the distorting effect of an optimal tariff is generally greater than that of a strategically motivated environmental policy.International Relations/Trade,

Agricultural Trade Liberalisation and Strategic Environmental Policy

We use an extended partial equilibrium trade model to derive optimal environmental policy responses to tariff reduction requirements and assess the impact of such policies on the welfare of trading partners. We find that countries which attribute preferential political weights to farmers' welfare have an incentive to implement environmental policies that deviate from the Pigouvian solution - even if production is not de facto linked to environmental externalities. We clarify the conditions under which trading partners do not gain from unilateral trade liberalisation if trade concessions are accompanied by strategic environmental policy changes. We postulate a role for the WTO in overseeing the process of domestic policy formulation.trade liberalisation, strategic environmental policy, multifunctionality, agri-environmental policy, WTO, Environmental Economics and Policy, D60, F11, F18, Q17,

Optimale Vertragsdifferenzierung in der Agrarumweltpolitik

This article deals with the optimal differentiation of agri-environmental contracts based on a self-selection mechanism. The paper demonstrates that both economic efficiency and effectiveness of public expenditures can be increased, if a menu of combinations of farming practices and payments are offered. However, there is a trade-off between efficiency and effectiveness, since the optimal programme minimising government expenses does not simultaneously minimise farmers’ opportunity costs. A numerical example of differentiated agri-environmental contracts, aiming for the reduction of nitrogen fertiliser in wheat production, illustrates that efficiency and effectiveness gains can be substantial. Furthermore, it is shown that economic rents for agricultural producers do not necessarily shrink as a result of contract differentiation, if the latter aims for the minimisation of public expenditures.agri-environmental policy, efficiency, adverse selection, mechanism design, self-selection, Agricultural and Food Policy, Environmental Economics and Policy,

Enlargement of the European Union: A movement towards the optimal trade bloc size?

This paper analyses how the enlargement of a trade bloc will affect national welfare. We establish a partial equilibrium model of a trade bloc either operating as a monopoly with a competitive fringe or facing a duopolistic game in production taxes/subsidies. Given this framework, we demonstrate how member countries’ welfare effects depend on their trade flow and the market power of the trade bloc. A numerical estimation of the effects of EU enlargement on the major grain crop markets suggests that welfare effects are negligible. Economic reasons are therefore unlikely to be a motivating force for further enlargement