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Free Trade Agreements and Environment for Sustainable Development: A Gravity Model Analysis

Author

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  • Xing Yao

    (School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China)

  • Rizwana Yasmeen

    (School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China)

  • Yunong Li

    (School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China
    Sichuan Institute for Free Trade Zone Research, Southwestern University of Finance and Economics, Chengdu 611130, China)

  • Muhammad Hafeez

    (School of Economics and Management, Beijing University of Posts and Telecommunications, Beijing 100876, China
    The Center of Industrial Economics and Green Development, Beijing University of Posts and Telecommunications, Beijing 100876, China)

  • Ihtsham Ul Haq Padda

    (Department of Economics, Federal Urdu University of Arts, Science and Technology, Islamabad 44000, Pakistan)

Abstract

Free trade agreements (FTAs) have a key role in the global value chain. In the meantime, these are also disturbing the environmental balance of the world. The objective of this study is to check whether the trade is good or bad for the environments of countries that are bonded by trade agreements. This study examines the impact of FTAs on bilateral carbon emissions within the gravity framework. We find a positive impact of FTA agreements on bilateral CO 2 pollution. However, in an income-based country group analysis, we find mixed evidence regarding FTAs. The analysis concerning high income countries indicates that free trade agreements are beneficial for high income countries, while, in the case of upper middle income and lower middle income countries, we find that the free trade agreements are not beneficial for their environments. These results of the effects of FTAs on bilateral CO 2 pollution imply that low income countries have a greater pollution effect even after the implementation of an FTA due to lenient environmental standards. There is a need for developing countries to learn from high income countries, as their FTAs are beneficial for decreasing pollution.

Suggested Citation

  • Xing Yao & Rizwana Yasmeen & Yunong Li & Muhammad Hafeez & Ihtsham Ul Haq Padda, 2019. "Free Trade Agreements and Environment for Sustainable Development: A Gravity Model Analysis," Sustainability, MDPI, vol. 11(3), pages 1-17, January.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:3:p:597-:d:200221
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