Modeling the impacts of environmental policies on agricultural imports

Abstract

For current policy debates in agricultural and food industries, policy analysts need to evaluate the impacts of how proposed changes in domestic environmental regulations may alter agricultural trade in the future. Given the industry-specific nature of many policies issues, analysts need sector and industry-specific modeling approaches that rely on a minimum of time and data needs (at least for initial analyses). This paper develops two basic models (one for homogeneous products and one for differentiated products) that policy analysts can use to evaluate quantitatively the impacts of proposed environmental policy changes on agricultural production and imports. Each model is adjusted to analyze process-oriented policies targeting domestic producers, product-oriented policies targeting both domestic and foreign producers, and information policies targeting domestic consumers (in combination with product and process policies). These models also show that simplistic generalizations regarding environmental regulations and agricultural trade should not be expected when analyzing policies targeting specific industries.