Trade liberalization and forest transition

• Date: 01 September 2017
• Author: Fernando Pueyo,Rafael González‐Val
• Published date: 01 September 2017
• DOI: http://doi.org/10.1111/ijet.12129

doi: 10.1111/ijet.12129

Trade liberalization and forest transition

Rafael Gonz´

alez-Val∗and Fernando Pueyo†

Wede velopa theoretical model that provides an additional explanation for the forest transition

based on a trade liberalization scenario. Weintroduce a renewable natural resource (wood), used

as an input by manufacturing firms, in a framework with economic geography foundations:

transport costs affect the spatial distribution of firms. In a general equilibrium, the results

reproduce the forest transition at a global scale: a decrease in transport costs has an initial

negative effect on the worldwide stock of the natural resource, but this effect is offset over time

as a consequence of industrial reallocation and eventually disappears in the long run.

Key wor ds forest transition, natural resource, industrial location, trade liberalization

JEL classification F18, Q20, Q23, R12

Accepted 25 February 2016

1 Introduction

There is an extensive literature on the effects of trade liberalization on natural resources. A general

conclusion might be that an increasing openness to international trade (basically represented by

the fall in international transport costs, although changes in other trade policy measures are also

important) increases the specialization of different countries. Therefore, those with comparative

advantages in natural resources increase their natural condition as suppliers of these resources to

the rest, who specialize in industrial activities. This is the typical result of the theory of international

trade: liberalization leads to specialization – complete, as in Ricardo’s world, or incomplete, as in

Krugman (1980).

Among all natural resources, the effect on forest areas has received much attention in the lit-

erature; see the review by Robalino and Herrera (2009). In the context of growing environmental

concerns, the loss of forest area has emerged as a problem in many developedcountries. The g rowth

of economic activity requires increasing amounts of resources (land, timber, etc.). To the extent

that they are not renewable or that their regeneration is relatively slow, one might expect a gradual

depletion of these resources.

∗Department of Economic Analysis, Faculty of Economics and Business, University of Zaragoza, Zaragoza and Institut

d’Economia de Barcelona (IEB), Faculty of Economics and Business, University of Barcelona,Barcelona, Spain. Email:

rafaelg@unizar.es

†Department of Economic Analysis, Faculty of Economics and Business, Universityof Zaragoza, Zaragoza, Spain.

Financial support was provided by the Spanish Ministerio de Econom´

ia y Competitividad (projects ECO2013-45969-P

and ECO2016-75941-R), the DGA (ADETRE research group) and FEDER. Earlier versions of this paper were presented

at the 19th Annual Conference of the EuropeanAssociation of Environmental and Resource Economists (Prague, 2012),

at the 66th European Meeting of the Econometric Society (M´

alaga, 2012), at the 59th Annual North American Meetings

of the Regional Science Association International (Ottawa, 2012), at the Fifth World Congress of Environmental and

Resource Economists (Istanbul, 2014), and at the XXXIX Simposio de An´

alisis Econ´

omico (Palma de Mallorca, 2014),

and all the comments made by participants are much appreciated. All remaininger rorsare ours.

International Journal of Economic Theory 13 (2017) 269–287 © IAET 269

International Journal of Economic Theory

Trade and forest transition Rafael Gonz´

alez-Valand Fernando Pueyo

Figure 1 Change in forest area (annual rates of change), 1990–2010

Source: FAOSTAT.The Global Forest Resource Assessment (FAO 2010) is the main sourceof forest area

data in FAOSTAT. Data were provided bycountr ies for the years1990, 2000, 2005 and 2010. Data on

intermediate years were estimated for FAO using linear interpolation and tabulation.

Note: Trend curves fitted by locally weighted scatter plot smoothing.

However, recent data offer partial good news. After several decades of continuous decrease in

forest areasall over the world, the rates of deforestation have diminished in many countries over recent

years. One of the key findings of the Global Forest Resources Assessment 2010 (Food and Agriculture

Organization (FAO) 2010) was that “ther ateof deforestation shows signs of decreasing”, although it

is still high. Figure 1 shows the annual rates of change in the forest areas of different regions based

on data from FAOSTAT. The left-hand graph displays the evolution in world rates and in the rates of

the Americas (North America, Central America, South America and the Caribbean). The Americas

represented 39% of the worldwide forest area in 2010. We can observe that, although growth rates

remain negative, there has been a remarkable decrease in deforestation rates both at world and at

American levels in recent years. The right-hand graph highlights the Brazilian case, where a growing

evolution in rates is also observed. Brazil represented 13% of the total forest area in the world in

2010, and the Brazilian Amazon is one of the most important cases of study. Obviously,this evidence

is weak as the data span considered is very short, only from 1990 to 2010. However, there are several

papers that document this forest change in different areas: Finland (Myllyntaus and Mattila 2002),

India (Foster and Rosenzweig 2003), southeastern Mexico (Brayand Klepeis 2005), the Ecuador ian

Andes (Farley 2010), the Ecuadorian Amazon (Rudel et al. 2002) and northeastern United States

(Pfaff and Walker2010).

This change in the trend from decreasing to expanding forestswas defined as the forest transition

by Mather (1992), which suggests the existence of a turning point. Therefore, the forest transition

theory (FTT) provides a framework for explaining scenarios of increasing forest cover after a de-

creasing phase. That is to say, although in the first stage economic activity needs a growing volume

of natural resources and this thus causes the depletion of forests, at some point the trend reverses,

allowing the recovery of the forest area. The argument can also be formulated in terms of the envi-

ronmental Kuznets curve (see Pfaff and Walker 2010). Empirically, evidence supporting the forest

transition is increasing. By using data from the Global Forest Resources Assessment 2015 (FAO2015),

Keenan et al. (2015) find that, between 1990 and 2015, 13 tropical countries may have either passed

through their forest transitions from net forest loss to net forest expansion, or continued along the

path of forest expansion that follows these transitions.

Many papers (Pfaff 2000; Andersen et al. 2002; Weinhold and Reis 2004; Pfaff and Walker

2010) point to increased transport easiness (through reductions in costs or liberalization of

270 International Journal of Economic Theory 13 (2017) 269–287 © IAET