Will Trade Liberalization Harm the Environment? The Case of Indonesia 2020

Kym Anderson and Anna Strutt

No 1933, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Most-favoured-nation (MFN) trade liberalizations will always improve global economic welfare provided globally optimal environmental, and other, policies are in place. But since the latter proviso is not met in practice, empirical studies of the environmental and resource depletion effects of such reforms are needed to convince sceptics that trade reform is still worthwhile. This paper provides a methodology for doing that. It is illustrated with a case study of Indonesia, a large newly industrializing country that is rich in natural resources and committed to taking part in major multilateral and regional trade liberalizations over the next two decades. A modified version of the global CGE model known as GTAP is used to project the world economy to 2010 and 2020 both with and without those reforms. An environmental module is attached to the Indonesian part of that global CGE model so as to measure the effects of changes in economic activity on air and water pollution. The proportional contributions to environmental indicators of changes in the level and composition of output, and changes in production techniques, are identified. A base case projection without trade reform is compared with alternative scenarios involving full global implementation of Uruguay Round commitments by 2010, and the additional move to MFN free trade by APEC countries by 2020. The study suggests that, at least with respect to air and water, trade policy reforms slated for the next two decades would in many cases improve the environment and reduce the depletion of natural resources and, in the worst cases, would add only slightly to environmental degradation – even without toughening the enforcement of existing environmental regulations or adding new ones, and even if the reforms stimulate a faster rate of economic growth.

Keywords: Global CGE Model; Indonesia; Trade and Environment (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F17 O13 Q2 Q4 (search for similar items in EconPapers)
Date: 1998-07
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1933 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Will Trade Liberalization Harm the Environment? The Case of Indonesia to 2020 (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1933

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1933

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().