Trade Sanctions and Green Trade Liberalization
AbstractThis paper studies the impact of a WTO withdrawal of trade concessions against countries that fail to respect globally recognized environmental standards. We show that a punishing tariff can be effective when environmental and trade policies are endogenous. When required standards lie within a reasonable range, compliance along with free trade as a reward is the unique equilibrium outcome. A positive optimal tariff in the case of non-compliance prevents pollution-motivated delocation, but only works as a successful credible threat and does not emerge in equilibrium. Results are consistent with broad empirical evidence that disputes the pollution haven hypothesis and suggests capital movements to be non-pollution related.
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Bibliographic InfoPaper provided by University of Modena and Reggio E., Dept. of Economics in its series Center for Economic Research (RECent) with number 011.
Length: pages 21
Date of creation: Mar 2008
Date of revision:
Environmental Policy; WTO; Delocation; Tariffs; Credible Threat;
Other versions of this item:
- 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 Accounts and Accounting; Environmental Equity; Population Growth
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
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