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Multilateral Environmental Agreements and Trade Obligations: A Theoretical Analysis of the Doha Proposal

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Author Info
Alireza Naghavi (PSE, Ecole Normale Supèrieure)

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Abstract

The Doha declaration on trade and environment proposed to clarify the relationship between multilateral environmental agreement (MEA) trade obligations and WTO rules by only guaranteeing economic integration upon ratification of certain MEAs. In other words, it pushed to authorize the use of trade measures against non-compliance, denying a non-signatory of its WTO rights to exercise countervailing tariffs. This paper demonstrates that the Doha proposal can be effective when environmental policy and its trade obligations are endogenous. Under plausible circumstances, ratification by a non-signatory to the MEA along with free trade as a reward is the unique equilibrium outcome. Delocation to pollution havens does not occur, as optimal tariffs are positive if standards are not adopted. Tariffs however only work as a credible threat and do not emerge in equilibrium. Results are consistent with broad empirical evidence that opposes the pollution haven hypothesis and suggests capital movements to be non-pollution related.

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Publisher Info
Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.52.

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Date of creation: Apr 2005
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Handle: RePEc:fem:femwpa:2005.52

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Related research
Keywords: Environmental policy; WTO; Location of firms; Green tariffs; Multilateral environmental agreements; Doha declaration;

Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F18 - International Economics - - Trade - - - Trade and Environment
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting
R38 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Government Policies; Regulatory Policies

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  1. Smarzynska Javorcik, Beata & Wei, Shang-Jin, 2001. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," CEPR Discussion Papers 2966, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Jean-Marie Grether & Jaime de Melo, 2003. "Globalization and Dirty Industries: Do Pollution Havens Matter?," NBER Working Papers 9776, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Blackwell Publishing, vol. 99(2), pages 241-59, June. [Downloadable!] (restricted)
  4. Ulph, Alistair & Valentini, Laura, 2001. " Is Environmental Dumping Greater When Plants Are Footloose?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(4), pages 673-88, December. [Downloadable!] (restricted)
  5. Carraro, Carlo & Siniscaico, Domenico, 1994. "Environmental policy reconsidered: The role of technological innovation," European Economic Review, Elsevier, vol. 38(3-4), pages 545-554, April. [Downloadable!] (restricted)
  6. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January. [Downloadable!] (restricted)
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  7. Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April. [Downloadable!] (restricted)
  8. J. Neary, 2006. "International Trade and the Environment: Theoretical and Policy Linkages," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(1), pages 95-118, 01. [Downloadable!] (restricted)
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  9. J Peter Neary, 2003. "Europe on the Road to Doha - Towards a New Global Trade Round," Working Papers 200317, School Of Economics, University College Dublin. [Downloadable!]
  10. Barrett, Scott, 1997. "The strategy of trade sanctions in international environmental agreements," Resource and Energy Economics, Elsevier, vol. 19(4), pages 345-361, November. [Downloadable!] (restricted)
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