International trade and tropical deforestation interact in multiple ways. This paper 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 trade liberalization only if the remaining stock is, in any case, diminished. For that reason, S speeds up exploitation.
These negative results are reversed if the parties can negotiate preliminary tariffs that are contingent on the size of the remaining stock. The equilibrium agreement slows the deforestation rate. When it is combined with export subsidies, all forests can be conserved. The parties cannot commit to future policies, but they obtain the same outcome as if they could.