Conference Agenda

Managed trade has re-emerged as a central policy tool, but its local environmental consequences remain poorly understood. We study the 2014 U.S.–Mexico Sugar Suspension Agreement, which restricted Mexican access to the U.S. sugar market and raised domestic sugar prices by the equivalent of a 70 percent tariff. Combining satellite fire detections, smoke-PM2.5, land-use data, and hand-collected sugar mill locations on a 1-kilometer grid, we use proximity to the nearest mill as a measure of local exposure to the national trade shock in a spatial difference-in-differences design. Agricultural fire activity rose by approximately 15 percent within three years. The increase was concentrated not closest to mills, where land was already specialized in sugarcane, but along an intermediate-distance cultivation frontier where newly profitable land was converted into sugarcane production. The response was driven by extensive-margin land conversion, even as burning intensity declined closer to mills. Additional burning also shifted toward early winter, when atmospheric conditions can increase smoke damages. Under conservative assumptions, the implied mortality and ecosystem-service costs exceed $1 billion. The results show that managed trade can generate substantial domestic environmental externalities when protection expands pollution-intensive production in spatially constrained sectors.