Can Trade Liberalization Have Environmental Bene®ts in Developing Country Agriculture? A Sri Lankan Case

In an economy dominated by agriculture, trade policy reforms and associated changes may induce substantial reallocation of land between more and less erosive uses. However, the direction and magnitude of such a shift is dif®cult to predict due to the presence of existing policy distortions and of world market power in agricultural exports; moreover, changes occurring within agriculture may have economy-wide welfare effects through markets for factors and commodities. We use an applied general equilibrium model to evaluate and quantify the likely impacts of an across-the-board tariff reduction in Sri Lanka. In a related analysis, we examine the economic and environmental implications of technical progress in an important export sector, tea. We ®nd that both types of change increase the demand for land in tea, a relatively less erosive sector, and thus have environmental as well as economic bene®ts for the Sri Lankan economy. 1999 Societ