A general equilibrium analysis of trade liberalization impacts on agriculture and environment

Iran is required to reduce import tariffs in order to be accepted as a member of the World Trade Organization. This study aims at investigating economic and environmental impacts of tariffs removal especially on agricultural sector applying a computable general equilibrium framework based on the Iranian social accounting matrix and decomposing total emission of the selected pollutants into energy use, production process and final non-energy use emission. The results showed that removing agriculture and agricultural industries tariffs, makes agricultural output and relative prices to fall. Cutting non-agricultural tariffs results in higher output and lower relative prices in agricultural sectors, however, the changes in output exceeds the corresponding relative price changes. Cutting all tariffs also raises the welfare. In particular, the higher income households will be better off much more than others. Pollutants emission also tends to decrease as removing the tariffs. Agricultural output composition will change in favor of horticultural products if tariffs are removed.   Key words: Import tariff, agriculture, welfare, pollution, Iran.