Saving the Environment Has Trade Effects

April 26, 2000

As policy makers seek to minimize the adverse effects of agricultural operations on the environment, they also might do well to look at the potential effects such laws and regulations have on trade. A USDA report says "varying effects" result from environmental regulations and policies.

The study notes that sales from exports are an "important component of market returns" for several commodities. "Some studies show that specific environmental policies may have significant trade effects and large increases in production costs," the report, included in the May issue of Agricultural Outlook, says.

For example, agricultural chemical use restrictions in the United States and European Union may affect trade significantly by reducing production, and that can increase production costs dramatically on a per-unit basis while also decreasing exports.

A ban on methyl bromide use as a soil fumigant in the United States may increase U.S. imports of specific vegetables from Mexico, the study continues. Implementation of the EU’s nitrate directive – that limits nitrogen applications to the soil – would have "considerable effects on EU net trade of livestock, livestock products, grains and oilseeds," according to one USDA report.

Using wheat as an example, the study finds that using four scenarios, wheat produce declines under all four from reduced acreage or reduced nitrogen fertilizer or both. Export volume declines under all scenarios but declines the most when land is retired in an effort to reduce nitrogen fertilizer use.

The full report is available here.