Forest plays a significant role in the overall balance of carbon in the
atmosphere. Forest carbon sequestration can potentially reduce the
accumulation of greenhouse gases in the atmosphere. However, when
deforestation takes place, carbon is released to the atmosphere again.
Globally, it has been estimated that about 11% to 39% of all carbon
emissions from human origin come from the forest sector (Hao et al.
1990). Regarding global warming, the balance between forest conservation
and deforestation can change forest sector activities from a solution to
a problem and vice versa.
Meanwhile, trade has significantly increased across the world. Total
world trade has been increasing since 2000 at an average rate of 12% (WTOb 2009),
and is expected to continue to grow in the following years due to new
agreements. Will these trade trends have an effect on forest cover and
deforestation? Which countries are more likely to be affected? What will
be the trade effects on welfare on resource abundant countries? Will
trade have an effect on conservation efforts? All these questions have
been the focus of abundant economic research in the last two decades.
Will trade increase deforestation?
We find that deforestation is affected by agricultural output prices.
Therefore, when trade affects these prices, it will also affect
deforestation rates. When a country enters international markets, local
prices get closer to international prices. So, if trade liberalization
brings local agricultural prices upwards, deforestation will increase.
But if trade liberalization leads to local agricultural price
reductions, deforestation will decrease. This implies that trade can
potentially increase or decrease deforestation depending on the effects
on local prices and other characteristics of the country. Those
countries that have comparative advantage producing agricultural good
and timber goods are the ones that will potentially be more affected by
increases in trade.
Forest access also plays a key role into the analysis. Even for those
countries where agricultural and timber production will increase, access
might limit the effects on deforestation. In countries where forestland
is inaccessible, specialization and/or transitions from other non-forest
activities to the activity where the country has advantage might take
place, having little impact on forest stocks. Also in accessible areas,
the abundance of other resources such as labor and capital are also
necessary to increase deforestation. However, empirical evidence reveals
that across the globe there are many countries with these
characteristics. Increases in agricultural and timber prices have lead
to increases in deforestation in Mexico, Tanzania, Thailand, Brazil,
Costa Rica, Australia and Brazil to name a few.
The literature is divided on the effects of timber extraction as a
consequence of trade on deforestation. Researchers have found that for
some countries, increase in prices of timber will lead to increases in
deforestation as mentioned before. However, others have argued that the
effect depends on different conditions. Other drivers of deforestation
should be jointly relevant. This is because timber extraction reduces
the costs of land use change. It thins the forests. But logging might
not necessarily cause a change forest to non-forest activities.
Additionally, some researchers argue that high prices of timber might
actually lead to increases in forest plantations as investment efforts.
Trade, institutions and welfare
Also, it is agreed that opening for trade may not increase welfare.
Trade can increase the depletion of the resource, which in the long run
could lead to lower welfare. Also, institutions can affect welfare
through their effect on trade. If institutions are not functioning
correctly it is likely that trade will reduce welfare. Property rights,
corruption and resource management regimes are deeply studied within the
role of trade. Few empirical works try to address the magnitudes of the
effects in resource extraction but certainly more empirical research in
this direction is needed.
What are the effects of trade on conservation efforts?
The literature is also consistent when concluding that conservation
policies might be, to some extent, offset through trade by deforestation
in other regions or countries. Some divergence in the magnitudes is
found but agreement exists on the direction especially across regions
and across countries. This is especially important for international
agreements. Negotiations that only focus on countries with high
deforestation rates, might not be effective as trade might generate
deforestation in countries that are not part of the negotiations (low
deforestation rate countries).
Can trade regulations be used to create incentives for conservation?
Researchers are still discussing whether trade sanctions can be used for
environmental purposes. Some argue that this can help global
environmental efforts but other say that this can generate perverse
incentives by reducing the value of the stock of the resource, which
could lead to depletion. Certainly, the amount of environmental clauses
has increased significantly in trade agreements.
After reviewing the economic literature, there are important aspects
that can be considered when designing trade policies and/or conservation
policies in an opening world:
Trade can increase deforestation and reduce welfare in resource abundant
countries. Conservation efforts in accessible forest areas, stronger
institutions and long term sustainability policies might reduce these
Conservation efforts in one country might be offset by increase in
deforestation in other country. When considering global efforts such as
carbon sequestration, conservation policies need to be designed
Trade policies oriented to create conservation efforts might not always
work. Policies such as certification and labeling that reduce the
incentives of indiscriminate short term extraction but create long term
value of the natural resource could be an option.
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