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Regional versus Multilateral Trade Liberalization, Environmental Taxation, and Welfare

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  • Soham Baksi

Abstract

The paper considers trade between identical countries with imperfectly competitive markets, and compares the impacts of regional and multilateral tariff reduction on strategic environmental taxation and welfare. While both forms of trade liberalization increase production and consumption in tariff‐reducing countries, regionalism also reduces production in a non‐participating country and may decrease its consumption. Consequently, regionalism and multilateralism change pollution tax and welfare in the tariff‐reducing countries in similar ways when pollution is local, but in dissimilar ways for global pollution. When pollution is global, regionalism is likely to be preferred to multilateralism for the establishment of free trade among countries. Libéralisation du commerce régional versus celle du commerce multilatéral : fiscalité environnementale et bien‐être. Ce mémoire considère le commerce entre des pays identiques avec des marchés de concurrence imparfaite, et compare les impacts d'une réduction régionale et multilatérale de tarifs sur la fiscalité environnementale stratégique et le bien‐être. Même si les deux formes de libéralisation accroissent la production et la consommation dans les pays qui réduisent les tarifs, le régionalisme réduit aussi la production dans un pays non‐participant, et peut réduire sa consommation. Conséquemment, régionalisme et multilatéralisme changent la taxe sur la pollution et le bien‐être dans les pays qui réduisent leur tarif d'une manière similaire quand la pollution est locale, mais de manière dissimilaire quand la pollution est globale. Quand la pollution est globale, le régionalisme est susceptible d'être préféré au multilatéralisme pour l'établissement du libre commerce entre pays.

Suggested Citation

  • Soham Baksi, 2014. "Regional versus Multilateral Trade Liberalization, Environmental Taxation, and Welfare," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(1), pages 232-249, February.
  • Handle: RePEc:wly:canjec:v:47:y:2014:i:1:p:232-249
    DOI: 10.1111/caje.12072
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    3. Hinnerk Gnutzmann & Arevik Gnutzmann-Mkrtchyan, 2019. "The silent success of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 52(1), pages 178-224, February.
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    7. Weng, Yungho & Hsu, Kuang-Chung & Liu, Bih Jane, 2019. "Increasing worldwide environmental consciousness and environmental policy adjustment," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 205-210.

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    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • 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

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