Barriers to trade in environmental goods: How important they are and what should developing countries expect from their removal
June 30, 2020
Fast onset events
Trade reduces the amplitude of extreme events like a drought. But policy reactions to large shocks can increase the amplitude of the shock. During the South African drought of 2015-6, policies had spillovers in neighboring countries. Following the 2008-09 financial crisis, export restrictions by major crop exporters and reduction in tariffs by importers amplified the shock. Policy coordination is needed to control spillover effects.
Slow-onset events
Modelling efforts have concentrated on exploring the ‘margins’ of adjustment to CC: changes in production levels of existing crops; switches in crops; changes in land utilization; labor relocating to urban areas/migration; adjustments in the volume of trade at different scales (regional or international). All reviewed models show that enlarging the channels of adjustment mitigate the amplitude of the loss in welfare from expected CC over the 21st Century. Decomposing the welfare changes suggests two conclusions. First adjustments in crop selection and in bilateral trade partners contribute approximately equally to reducing the costs of adjustments. Second, the expected sharp increase in food prices resulting from warming is likely to hit SSA most strongly.
Trade facilitation
A functioning global trading system is a public good to become more valuable under CC. Free and unfettered access to global food (and other key) supplies must be ensured, especially for Africa. This requires a rapprochement between the trade and climate regimes. As an entry point, besides dealing with harmful subsidies (fossil fuels, fisheries), developed countries could conclude a plurilateral Environmental Goods Agreement (EGA) that would be a triple win for trade, for the environment, and for African agriculture that needs tariff-free access to climate-Adaptation related EGs (AEGs). The paper documents the magnitude of tariffs on Environmental Goods.
The paper concludes that African countries could improve the functioning of the continental policy architecture by several measures. First by excluding AEGs from exclusion lists on the AfCFTA while simultaneously reducing their barriers to trade on AEGs and EPPs. Second, preserving the environment should be mainstreamed in the African trade architecture by including environmental provisions.
Casella H., De Melo J. (2022) Africa under a warming climate : the role of trade towards building resilient adaptation in agriculture. EUI RSC Working Paper 2022/56.
