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Environmental tariffs on polluting imports

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  • Muthukumara Mani

Abstract

This paper examines the implications for the use of trade measures as “weapons” to address global environmental concerns. There are already proposals in the U.S. senate to impose an environmental tariff against foreign nations whose cost advantages stem from less stringent environmental standards than the U.S. The paper argues that trade policy measures typically are not the first best instruments for achieving environmental objectives. Even theoretically they could be shown to be welfare improving only under a very narrow range of circumstances. Their use in place of more efficient policy instruments may not only end up distorting the patterns of world trade but also may worsen the overall patterns of environmental quality. Simulation exercises undertaken here suggest that it is highly unlikely that countries would alter their environmental behavior because of the imposition of the proposed U.S. tariff. Hence the proposed legislation has very uncertain environmental consequences. Even if the policy has been mainly designed to protect domestic industries, it would only provide a minor margin of protection because the costs of complying with the environmental standards represent a relatively small element in the total costs. The analysis suggests that trade policy introduced in this fashion will have no significant impact on the patterns of world trade and pollution. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Muthukumara Mani, 1996. "Environmental tariffs on polluting imports," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 7(4), pages 391-411, June.
  • Handle: RePEc:kap:enreec:v:7:y:1996:i:4:p:391-411
    DOI: 10.1007/BF00369626
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    References listed on IDEAS

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    1. Baldwin, R E & Murray, Tracy, 1977. "MFN Tariff Reductions and Developing Country Trade Benefits under the GSP," Economic Journal, Royal Economic Society, vol. 87(345), pages 30-46, March.
    2. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-873, August.
    3. H. David Robison, 1988. "Industrial Pollution Abatement: The Impact on Balance of Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 21(1), pages 187-199, February.
    4. Mutti, John H. & Richardson, J. David, 1977. "International competitive displacement from environmental control The quantitative gains from methodological refinement," Journal of Environmental Economics and Management, Elsevier, vol. 4(2), pages 135-152, June.
    5. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
    6. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    7. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
    8. Pasuiuca, Carl Jr., 1984. "The short-run impact of environmental protection costs on U.S. product prices," Journal of Environmental Economics and Management, Elsevier, vol. 11(4), pages 380-390, December.
    9. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
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    Citations

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    Cited by:

    1. Rauscher, Michael, 2001. "International trade, foreign investment, and the environment," Thuenen-Series of Applied Economic Theory 29, University of Rostock, Institute of Economics.
    2. Cunha, Barbara & Mani, Muthukumara, 2011. "DR-CAFTA and the environment," Policy Research Working Paper Series 5826, The World Bank.
    3. Pham Thai Hung & Bui Anh Tuan & Nguyen The Chinh, 2016. "The Impact of Trade Liberalization on Industrial Pollution: Empirical Evidence from Vietnam," EEPSEA Research Report rr2016042, Economy and Environment Program for Southeast Asia (EEPSEA), revised Apr 2016.
    4. Hettige, Hemamala & Mani, Muthukumara & Wheeler, David, 2000. "Industrial pollution in economic development: the environmental Kuznets curve revisited," Journal of Development Economics, Elsevier, vol. 62(2), pages 445-476, August.
    5. World Bank, 2007. "International trade and Climate Change : Economic, Legal, and Institutional Perspectives," World Bank Publications, The World Bank, number 6831.
    6. Mar Reguant & Meredith Fowlie, 2017. "Measuring and Mitigating Leakage Risk," 2017 Meeting Papers 383, Society for Economic Dynamics.
    7. Murali Kallummal, 2012. "SPS measures and possible market access implications for agricultural trade in the Doha Round: An analysis of systemic issues," Working Papers 11612, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    8. Mani, Muthukumara & Jha, Shreyasi, 2006. "Trade liberalization and the environment in Vietnam," Policy Research Working Paper Series 3879, The World Bank.

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