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Trade Sanctions and Green Trade Liberalization

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Author Info
Alireza Naghavi ()

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Abstract

This 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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File URL: http://www.recent.unimore.it/wp/RECent-wp11.pdf
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Publisher Info
Paper provided by University of Modena and Reggio E., Dept. of Economics in its series Center for Economic Research (RECent) with number 011.

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Length: pages 21
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:mod:recent:011

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Web page: http://www.recent.unimore.it/
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Related research
Keywords: Environmental Policy; WTO; Delocation; Tariffs; Credible Threat;

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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References listed on IDEAS
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  1. 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)
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  2. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February. [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. Beata Javorcik & Shang-Jin Wei, 2005. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(2), pages 1244-1244. [Downloadable!] (restricted)
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  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)
    Other versions:
  7. 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!]
  8. Conconi, Paola & Perroni, Carlo & Riezman, Raymond, 2006. "Is Partial Tax Harmonization Desirable?," CEPR Discussion Papers 5761, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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