Lecture 6: Trade and Forests

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13 Jan 2011
Lecture 6: Trade & Forests
Trade & the Environment:
·trade has taken a sig. share of the blame for forest degradation over the last decade
·immediate causes of forest degradation:
omarket failures: when forces of supply & demand fail to deliver the optimal societal
§occurs when producers &/ consumers don't take into account the full cost of their
actions (ex. pollution)
§results in too much investment in degrading activities &/ too few in remediation
oundefined property rights: allocation of rights is unclear
§as property rights are a "bundle-of-sticks," if rights unclear can result in sig. forest
ocollapse of trad. forest management systems
§many diff. management systems have existed, if transport. costs high & pop. is
densely small, & the society is rigidly self-enforcing, then are sustainable, but it:
·inexpensive to move large timber long distances
·pop. density is so large that resources are scarce
·taboos 'gainst exploitive behaviors break down
othen it is very diff. for trad. systems to cope, ex. fuel wood
§given time many of these systems recover in an altered
form, in the meantime many forests are degraded
opolicy failures
§usu. thought that gov'ts should correct these problems, but oft gov't policy not
only fails to do so, but exacerbates issues
·esp. gov't subsidy of "strategic" industries results in forest degradation
·reasons for countries to trade
oin a simple eco., trade unambiguously increases welfare
oby specializing both poor & rich will benefit from trade
§as both types of nations will consume more then they would've been able to
without trade, even the poorer nations
obut if both countries benefit, problems can arise:
§if labour costs, scarcity of products, competition, trade policy are biased in favour
of one nation then that nation can dictate the terms of trade, & it can get most/all
of the benefits
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