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T H E T R A D E A N D C L I MATE CH AN G E N EX US
be vulnerable to food insecurity by the end of the century (Stevens and Madani 2016). In Pakistan, a 1°C increase in temperature is estimated to lead to a substantial reduction in net farm revenue each year (Shakoor et al. 2011). The effects of climate change are not always negative, but governments need to ready themselves for the incoming adjustments and figure out how best to adapt. The main changes in climate will take the form of rising temperatures, changing patterns of precipitation, more frequent river floods, sea-level rise, melting ice caps, and other extreme weather conditions—all having a direct impact on how and what the world trades: how trade will be affected—that is, over land, by plane, or by ship—and what trade will be affected, particularly in response to changing comparative advantages and patterns of production. The consensus among climate change analysts is that rising temperatures will likely have a positive impact in colder areas, by boosting agricultural productivity,3 but will have a negative impact in hotter areas, especially in the tropics. A few studies have estimated positive changes, particularly in terms of transportation routes and transportation infrastructure (Heininen, Exner-Pirot, and Plouffe 2015). Arctic sea ice is already melting and opening new shipping routes, allowing ships with light icebreakers to navigate the Arctic Ocean more easily (Shiryaevskaya, Lombrana, and Tanas 2020). Within countries, the impacts of rising temperature and changes in rainfall patterns may be quite localized. For example, in Tanzania, while agricultural yields may rise in certain districts, they are expected to fall in others. Thus, impacts could differ across households both by region and by income category (Arndt et al. 2012). Understanding these changes would enable governments to design appropriate climate change adaptation policies. As the private sector will be at the forefront of adaptation within the policy framework to be defined by governments, it needs to be engaged in policy discussions from the outset. Most private sector actors in the poorest countries tend to view climate change as an “environmental issue” rather than as a business issue with significant implications for them. Consequently, much of the private sector underrates the degree of climate risks (Goldstein et al. 2018). Any messaging needs to take this misperception into account, stressing the dire economic consequences of climate change, particularly for production and supply chains. In this regard, early engagement is critical. Governance mechanisms would be better off taking the form of public-private dialogues with civil society such that climate change adaptation becomes an integral part of decision-making at all levels of society (Fayolle et al. 2019). Therefore, it will be important to assess the degree of climate risks along the production and supply chains of private sector investments that are highly vulnerable to climate change. Country-specific interventions regarding trade liberalization would be better informed if they were based on an in-depth analysis of the nexus between international trade and climate change. For example, any trade-related interventions targeted at boosting agricultural productivity and consequently increasing farmers’ incomes would be remiss to ignore the criticality of drought-resilience strategies (Alfani et al. 2019). Additionally, Nhemachena and Hassan (2007), in assessing farmers’ adaptation strategies for climate change in Southern Africa, find that farmers’ access to credit and extension services as well as climate change awareness are important determinants of farm-level adaptation. Moreover, Ouraich et al. (2019), in analyzing Morocco and Turkey, conclude that the greater the trade liberalization, the higher the gains in global welfare, although these gains may not be large enough to offset the negative impacts on agricultural productivity globally. Clearly, any mitigation or adaptation strategy needs to take into account country-specific development needs as well as the prevailing
