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Agricultural multifunctionality and trade liberalisation

Thilo Glebe () and Uwe Latacz-Lohmann
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Thilo Glebe: Technische Universität München, Lehrstuhl für VWL-Umweltökonomie und Agrarpolitik, Alte Akademie 14, 85350 Freising-Weihenstephan,Germany
Uwe Latacz-Lohmann: Department of Agricultural Economics, Christian-Albrechts University, Olshausenstr. 40, 24118 Kiel, Germany

Cahiers d'Economie et Sociologie Rurales, 2007, vol. 82-83, 57-73

Abstract: 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.

Keywords: agricultural trade; agricultural multifunctionality; strategic environmental policy; welfare economics (search for similar items in EconPapers)
Date: 2007
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Handle: RePEc:rae:jouces:v:82-83:y:2007:p:57-73