Australian Centre for International Agricultural Research (under PN9449) and the World Bank for financial assistance. Will Trade Liberalization Harm the Environment? The Case of Indonesia to 2020

ESTIMATING ENVIRONMENTAL EFFECTS OF TRADE AGREEMENTS WITH GLOBAL CGE MODELS: A GTAP APPLICATION TO INDONESIA Anna Strutt and Kym Anderson Provided globally optimal environmental and other policies are in place, mostfavoured -nation (MFN) trade liberalizations will always improve global economic welfare. But since the proviso is not met in practice, empirical studies of the environmental and resource depletion effects of such reforms are needed to determine whether trade reform is still worthwhile. This paper provides a methodology for doing that, using a modified version of a multi-country economy-wide model. Attention focuses on environmental effects in just Indonesia, a large newly industrializing country that is rich in natural resources and committed to taking part in major multilateral and regional trade liberalizations over the next two decades. A modified version of the global CGE model known as GTAP is used to project the world economy to 2010 and 2020 without and with thos...