Copeland and Taylor (1999) consider the effects of free trade on environmental quality by allowing environmental pollution in industrial sector. I assume that agricultural production also harms to the environmental quality through habitat carrying capacity destruction. The model offer's two arguments. First, if a small open economy specializes in agricultural sector in steady state, then the country's steady-state environmental quality and economic welfare may lower under free trade than in autarky. Second, if a small open economy specialized in industrial sector in steady state, then the country's steady-state environmental quality may be higher under free trade than in autarky.
