Can trade liberalization have environmental benefits in developing country agriculture? A Sri Lankan case study

Abstract

In this article, the authors discuss the impact of trade policy reforms and related policies on land allocation between several crops in an agricultural economy, with a focus on the degree of erosion caused by different crop types. The prediction of land use changes is complicated by the influence of the world market on agricultural exports and the policy distortions at the national level. Likewise, shifts in the agricultural sectors may have economy-wide repercussions through the factor and commodities markets. The authors quantify and evaluate the probable impacts of tariff reduction with an applied general equilibrium model in Sri Lanka. They also analyze the economic and environmental impact of technical progress in the cultivation of tea, a major agricultural export. Both lowering tariffs and enhancing technical progress increase the amount of land allocated to tea, which is environmentally and economically beneficial to Sri Lanka because tea is less erosive than most alternative crops.