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National Treatment and the optimal regulation of environmental externalities

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Author Info
Sumeet Gulati
Devesh Roy

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Abstract

We analyze the role of National Treatment in the regulation of environmental product standards for an open economy. A social planner uses product standards to control emissions from the consumption of a traded good. We show that whether National Treatment of standards interferes with welfare-maximizing policy depends on the instruments available to the policy maker (consumption or emissions tax) and differences in the cost of complying with the standard. We also highlight the asymmetric incidence of the domestic and import product standard when taxes are suboptimal. This asymmetric incidence can also cause welfare-maximizing policy to violate National Treatment.

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File URL: http://economics.ca/cgi/xms?jab=v41n4/CJEv41n4p1445.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 4 (November)
Pages: 1445-1471
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Handle: RePEc:cje:issued:v:41:y:2008:i:4:p:1445-1471

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Keywords:

Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F18 - International Economics - - Trade - - - Trade and Environment
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

Cited by:
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  1. Horn, Henrik, 2009. "The Burden of Proof in National Treatment Disputes and the Environment," Working Paper Series 791, Research Institute of Industrial Economics. [Downloadable!]
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This page was last updated on 2009-11-25.

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