International trade, species diversity, and habitat conservation

Trade barriers mayimprove welfare if propertyrights with respect to renewable natural resources are
lacking. Previous studies focus on the role of overharvesting, but we argue that trade-induced habitat
destruction should also be taken into account. Habitat is one of the keyfactors determining the long-run
viabilityof manynatural resources, and economic activityoftentimes goes at the expense of habitat. While
open access gives rise to within-industryexternalities, habitat destruction creates across-industry
externalities. We identifyunder what circumstances trade liberalization is welfare-enhancing as well as
contributing to nature conservation, and analyze the consequences of trade policy.
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