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.
Policy Recommendations
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
negative impacts.
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 globally.
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.
No: ERSD-2010-04
Authors:
Juan Robalino — Research Fellow at the Environment for Development
Initiative, CATIE, and Deputy Director of the Latin American and Caribbean
Environmental Economics Program, CATIE
Webpage (Opens in a new window)
Luis Diego Herrera — Research Fellow at the Environment for Development
Initiative, CATIE
Manuscript date:
December 2009
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official position of any staff members. Any errors are the fault of the
author. Copies of working papers can be requested from the divisional
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