Trade liberalization and the environment: The case of agriculture in South Africa

An input-output framework with environmental accounting module was used to investigate the implications of liberalising agricultural trade on the environment in South Africa. The results showed that trade liberalisation in the case of agricultural commodities will lead to environmental improvement. The empirical multi-sector model results were consistent with theoretical results obtained from comparative-statics partial-equilibrium trade models for the case of goods the production of which is associated with environmental externality and their domestic prices above world prices. The study suggested a general equilibrium approach, allowing for more flexible structure of substitution in demand and supply, output composition response, income effects and improved measures of environmental impact parameters for proper assessment of welfare changes associated with environmental externalities.