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Assessing the Environmental Impact of Liberalising Agricultural Trade - With Special Reference to EU-Mercosur - EC0102

The research project examines the potential effects on global trade in agricultural and food products and the environment of two international trade agreements currently being negotiated The first is the Doha Development Agenda (DDA), a yet unresolved long-running multi-lateral trade negotiation that has been taking place within the World Trade Organisation. The second is the recent re-launch of an intiative to improve bi-lateral trade relations between the European Union (EU) and a group of Latin American Countries which form a regional trading bloc called Mercosur. Current full members of Mercosur are Brazil, Argentina, Uruguay and Paraguay. Although both trade policy negotiations address multi-sectoral trade issues, the emphasis of this study is on the partial implications of any settlements on the agriculture and food sectors, and how this may impact on the environment. In particular, the Mercosur countries have significant areas devoted to the production and export of agricultural products (meat, cereals, sugar, fuit, nuts and vegetables, oilseeds and bio-fuels), and also have dominant shares of the EU import market for many of these products. Clearly further liberalisation of trade either under a DDA or EU Mercosur agreement may have important global trade creation and diversion effects, and would also impact on the EU agricultural sector, land use and environment as well as stimulating greater domestic production and its impact on land use within the Mercosur region, the latter having some globally significant ecosytems.

The project therefore uses a global multi-country, multi-commodity agricultural trade and environment model, the Lincoln Trade and Environment Model (LTEM), developed at Lincoln University, New Zealand, to explore different scenarios under sets of assumptions about the out-turn of the Doha and Mercosur negotiations. It should be noted that the latter are in their early stages, and hence one objective of the project is to inform negotiators as to the possible environmental consequences of specific trade liberalisation measures on a product and country basis in order that they may be factored in to decisions regarding any agreement. This is one of the primary benefits of the proposal which will be of value and give insights not only to policymakes, but also to major agri-trade businesses and environment bodies. The model itself generates outputs of changes in international agricultural commodity trade flows, production, consumption, and prices, and their economic welfare effects.

The LTEM however, also can analyse a range of trade-related effects on agricultural production and land-use and their effect on the environment. In particular it has an environment sub-module which generates the impacts of agricultural trade changes on greenhouse gas emissions and nitrate leaching from land use systems. However, the model base is currently 2004, and an important part of the project is to update the model coefficients and production, consumption and trade-data base to reflect more recent circumstances, and as a baseline against which to compare the effects of trade policy changes. A number of scenarios will thus be generated and compared with the baseline, DDA agreement; an EU-Mercosur free trade agreement; a combination of both multilateral trade agreements. In addition the research will identify which specific trade policy instruments and which specific product responses to them can have the greatest deleterious environmental impacts, in order to inform decisions regarding appropriate mitigation responses.

However, a wider range of environmental indicators than greenhouse gasses and nitrates are necessary for a wide ranging environmental impact assessment, and the project identifies a broad range of indicators which will complement those from the LTEM , particularly focussing on water use and impact, eutrophication, soil erosion, acidification and biodiversity. Environment scientists and experts within the project teams from the UK, New Zealand, Brazil and Argentina,will evaluate how these may be affected by the model based predictions arising from the trade policy measures. Both the quantitative model-based estimates and these qualitative indicators will be summarised and synthesised within an ecosystems services framework.
1) To simulate through the LTEM model the impact of agreed scenarios relating to potential outcomes of DDA and EU-Mercosur agreements on global agricultural production, consumption, prices and trade relative to baseline for the range of countries and commodities outlined in 7(c).

2) To estimate through the model the predicted production system adjustments to the changes in the global agricultural trade environment in Objective 1 and the quantitative effects on greenhouse gas emissions, and ground-water nitrates.

3) To examine the sensitivity of scenario outcomes in Objectives 1 and 2 to specific trade policy measures relating to commodity quotas/tariffs/tariff quota levels or other relevant non-tariff barriers in order to identify key environmental impact drivers, and hence their potential as mitigation instruments.

4) To ground-proof and comparatively evaluate model trade-flow predictions from Objective 1 for two major commodities in EU-Mercosur trade, against a transactions cost and supply/value chain analysis.

5) To develop and apply an ecosystems services framework within which the model based scenario environment impacts and insights from Objectives 2 and 3 can be supplemented as detailed in 7(c) and synthesised together with environmental science expert-based analysis.
Time-Scale and Cost
From: 2010

To: 2011

Cost: £98,923
Contractor / Funded Organisations
Lincoln University Agricultural Economics Research Institute, University - Harper Adams Agricultural College, Universidade Federal Do Rio Grande Do Sul, University - Warwick
Climate Change              
Diffuse Pollution              
Economic Research              
Ecosystem Service              
European Union (EU)              
Sustainable Development              
Water Quality