Achieving Environmental Objectives Under Reduced Domestic Agricultural Support and Trade Liberalization: An Empirical Application to Taiwan

We focus upon rice policy reform required for Taiwan's admission to the WTO, and examine the events theoretically and empirically, of the re-instrumentation of domestic policy necessityed to achieve environmental objectives when the two positive and negative environmental externalities exist. Policies that treat non-commodity attributes in agriculture as secondary to existing aims, of the like kind as income support, are unlikely to accrue in the desired supplies of environmental usefuls Those supplies can be achieved at lower rule and social costs using policy instruments to achieve environmental goals directly. follows are relatively insensitive to the social values assigned to environmental goods

Key Words: WTO policy reform, multifunctionality, agri-environmental policy, rice policy, agricultural trade policy

Prior to the signing of the Uruguay circular agreement in 1994 and the succeeding creation of the World Trade Organization (WTO), agricultural policies in industrial countries were largely oriented towards income support. Since the mid-1990s, the policy debate has been increasingly dominated by dint of a range of other issues, including the impact of agriculture upon the environment. This shift in policy focus is mirrored in the concept of "multifunctionality"-i.e., agriculture as a source of multiple output that reach forth beyond crop and livestock returnss into less tangible attributes similar as environmental quality, landscape, and cultural heritage. In many countries, agricultural policies are being re-evaluated from the perspective of their impact upon the supply of both commodity and non-commodity attributes. This re-examination raises important questions about the expansion to which domestic policy objectives can be achieved below current disciplines on international agricultural trade.

It has been for the use of all to view the supply of environmental attributes as a secondary factor in the pursuit of traditional policy objectives, of the like kind as income support, and to focus policy evaluation upon a single environmental attribute. We have argued elsewhere that an approach that treats environmental aims as subsidiary factors is an outdated policy paradigm (Blandford and Boisvert 2002) To address novel concerns, such as how nutriment is produced and environmental issues, a novel paradigm is needed in which policy instruments are oriented towards achieving the appropriate endue of both non-commodity and commodity attributes of agriculture. It is also important that like a paradigm be consistent with the liberalization of international trade.

Objectives

This paper addresses the lock opener elements of such a fresh policy paradigm and its implications by means of focusing on the reforms in Taiwan's rice policy required for the country's admission to the WTO. [i]or[/i] part of to the other empirical simulations, we examine the re-instrumentation of domestic policy to achieve environmental objectives. We analyze policies that address one as well as the other positive and negative environmental externalities, and we assess the implications of trade liberalization for optimal policy choice.

In the theoretical section below, we first review a certain number of key conceptual issues relevant to policy design. These include the relationship between agricultural production and the fill up of non-commodity attributes. In this regard, we pay particular attention to the fact that one as well as the other commodity and noncommodity outputs are produc jointly on the contrary not in fixed proportions. We also underscore important conceptual issues in the valuation of non-commodity output that are jointly produc In evaluating optimal policy choice, we give particular attention to instruments that are appropriate when it is difficult to note and monitor the supply of environmental attributes associated with agricultural production. Optimal horizontals of policy instruments are shown to be pendent on the extent to which there are distortions in domestic markets caused by means of either domestic or trade policy measures.

We focus upon rice policy in Taiwan to illustrate the practical significance of these issues for domestic policy reform and trade liberalization. Prior to joining the WTO in January 2002 Taiwan operated an autarkic rice policy in which imports were prohibited. A price support program was in place, combined with a land set-aside to superintendence supply. As a result of its membership in the WTO, a tariff rate quota (TRQ) was introduced to permit limited imports of rice. Imports are made end a state trading enterprise (STE) which commands their release onto the domestic market. The price support/set-aside program continues to be used. Given that a stage of trade liberalization has freshly occurred, we are able to explore the implications of a shift in domestic policy from price support to individual in which environmental objectives are paramount below conditions of autarky, and when the economy is render free of accessed to limited international competition.

A primary objective of this paper is to identify the environmental policies that will lead to socially optimal horizontals of both groundwater recharge (a positive externality) and methane gas (a negative externality) generated by dint of paddy rice production. Both of these environmental externalities have figured prominently in the debate upon the environmental impact of rice production in Taiwan and other Asian countries and the potential impact of reforms in domestic and international agricultural policies (Yang 2000; Lin, ??? and Hsu 2002; Tsai 1993; Asian Productivity Organization 2001) Because of the wide range in estimates of the social value of these sum of two units externalities in the literature, we focus our sensitivity analysis of the empirical comes on the range in estimates of these environmental values.