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Abstract

In many OECD countries, including the U.S., interest in developing agri-environmental payment programs is currently strong. In the future, the inclusion of an agri-environmental payment program into the WTO's "green box" could be more easily challenged by WTO member countries on the basis that it has more than "minimal" trade-distorting impacts on production. The goal of this paper is to conduct an ex ante analysis of the trade impacts of stylized examples of agri-environmental payment programs that have been proposed for implementation in the near future. To simulate the production and trade impacts of these programs, we use a partial equilibrium model of the U.S. agricultural sector in a sensitivity analysis across a range of design options for agri-environmental payments. For the three agri-environmental payment scenarios evaluated, the maximum change in exports ranges from a 7 percent decrease (wheat) to a 1 percent increase (soybeans). We do not expect the programs that decrease U.S. production, which would tend to have an upward pressure on world commodity prices, to be challenged before the WTO.

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