ENVIRONMENTAL EFFECTS OF AGRICULTURAL TRADE LIBERALIZATION AND DOMESTIC AGRICULTURAL POLICY REFORMS

Abstract

The paper reviews existing studies on linkages between agricultural policies, trade liberalization and the environment. Since the price and production changes induced by the Uruguay Round Agreement on Agriculture seem likely to be quite modest for most countries, this partial trade liberalization may not cause major changes, positive or negative, in the environmental impacts of agricultural production. Instead, the environmental impacts of domestic agricultural policy reforms will probably be more significant than impacts induced by the Uruguay Round Agreement on Agriculture. This is largely due to the fact that agricultural trade liberalization, partial or complete, can alleviate some policy failures which have adverse environmental impacts, but does not correct environmental market failures. By contrast, domestic agricultural policy reforms, while alleviating policy failures, could also tackle environmental market failures through, for example, agroenvironmental programmes.