Pesticide use and the effect of trade liberalization on environment for rice production

Purpose – In light of the global concern about the impact of trade liberalization on environment, this paper intends to measure, theoretically as well as empirically, the impact of freer rice trade on environmental quality in terms of chemical intensity, measured by a decreasing scale indicator. Design/methodology/approach – A dynamic land allocation model is designed that incorporates rational expectations on rice price and soil degradation due to long‐term cultivation on the same piece of land. Both demands for land and pesticides are derived and empirically estimated using time‐series data in Taiwan. Findings – The results reveal that chemical intensity may increase with freer trade. The effect of freer trade on chemical intensity was less significant in earlier days such as the 1980s than in recent years. The basic model explains, to some extent, why some country representative conveyed their concerns in the Committee of Trade and Environment under WTO about the environmental degradation due to freer trade in agriculture. It also implies that more investment on environmental protection is warranted in the course of trade liberalization. Research limitations/implications – Given the dramatic inflation of energy prices, more elaboration on the price specification with respect to pesticides may be warranted for future researches. Originality/value – The paper develops a rational expectations model to measure the impact of rice trade liberalization on environmental quality.