Abstrakt: Free trade is often criticized because it can cause resource depletion, such as deforestation in the tropics. The purpose of this paper is to explore how trade agreements can motivate environmental conservation. I first presents a dynamic model whereby the South (S) depletes to export the extracted units (timber) or the produce (beef) from land available after depletion. Because of the damages, the North benefits from liberalization only if the stock is already diminished. For that reason, S speeds up exploitation. All negative results are reversed if countries can negotiate a contingent trade agreement, where the gains-from-trade allocation, and thus the location on the Pareto frontier, is sensitive to the size of the remaining stock. In equilibrium, S conserves to maintain its favorable terms of trade, S conserves more than in autarky, and more when the gains from trade are large. The parties cannot commit to future policies, but they obtain the same outcome as if they could.
https://www.sv.uio.no/econ/personer/vit/bardh/dokumenter/tt.pdf
