The roles of agricultural trade and trade policy in climate change adaptation and mitigation

Abstract

This article examines how international trade and policy shape the economic consequences of climate-induced changes in crop productivity, considering both adaptation and mitigation. International trade serves as a global risk-sharing mechanism with the potential of ameliorating the adverse impacts of climate-induced crop shortages by allowing regions with agricultural surpluses to provide for those facing shortages. However, the effectiveness of trade in adaptation depends on whether changes in productivity occur in the short- or the long-run, the structure of tariffs and subsidies, and whether a country is a net importer or exporter of affected products. The most recent evidence on long-term adaptation suggests that the changes in domestic crop portfolios and a diversified set of suppliers are the most effective ways for food-dependent countries to adapt to projected changes in climate toward the mid-century. In the short term, trade helps to buffer against seasonal price shocks, offering relief from sudden price spikes in food staples. Concerns about importing price volatility have little support in the historical record. Still, they may be justified as shifts in climate may result in more frequent extreme events affecting large producing regions of the world. Emerging international trade policies aimed at climate change mitigation, such as carbon border adjustments and laws banning trade in products associated with deforestation, are gaining traction. The adaptability of the international trade regime to these policies remains uncertain. Critical areas for further research include moving from impact assessment to analyzing how the current structure of farm programs worldwide interacts with adaptation and mitigation strategies, expanding the range of crops, and including livestock products in the analysis.