Gravity analysis of trade for environmental goods focusing on bilateral tariff rates and regional integration

The importance of trade liberalization of environmental goods has been widely recognized since the 2001 Doha Ministerial Declaration of the World Trade Organization. This paper investigates the determinants of bilateral trade for ten environmental goods used in renewable energy production and monitoring environmental conditions, based on the classification of the Asia–Pacific Economic Cooperation (APEC). This study contributes to the fields of trade and environmental protection by rigorously assessing the effects of tariff reduction and regional integration on the trade of environmental goods, using data of 73 countries for 4 years from 2013 to 2016. The results of three types of analyses with the gravity model show robust effects of bilateral tariff rates on three goods, HS850300 (parts of renewable energy electricity generating sets), HS902610 (instruments for measuring air quality), and HS902620 (instruments for measuring pressure). Furthermore, the results show the robust effect of regional integration for the European Union on two goods, for the APEC on four goods, and for East and South-East Asia on three goods. In addition, by examining the intra-industry trade index of the goods having regional trade effect, it is found that the main developed countries and some emerging countries tend to have high indices based on either product differentiation of final goods or production fragmentation of parts and components within each region. These results suggest that reducing tariff rates on more environmental goods through policy decisions and strengthened regional networks will accelerate the trade and proliferation of environmental goods considered beneficial for environmental protection.