Deep Trade Agreements, Development Assistance and Sustainability Goals

The literature on preferential trade agreements (PTAs) has mainly focused on the trade effects of non-trade provisions (NTPs) addressing environmental or labor policies. Using a dataset covering more than 120 countries and several decades, we employ a synthetic difference-in-difference estimator to study whether such provisions are accompanied with changes in associated sustainability-related performance indicators in developing countries. Given the importance the EU places on using trade to pursue sustainability goals, we differentiate between EU and other PTAs. The analysis is motivated by two arguments that have influenced the design of deep PTAs: (i) legally enforceable NTPs are more effective in improving nontrade outcomes in developing countries; and (ii) acceptance of NTPs will be accompanied by (more) aid from high-income partners. We find limited support for these arguments. Enforceable provisions have no effect on performance indicators, whereas non-enforceable provisions in non-EU PTAs are accompanied by deterioration in several outcome measures. Enforceable provisions are associated with less aid; we only find a positive relationship between EU aid and nonenforceable environmental provisions.