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Fighting Global Warming: Is Trade Policy in Latin America and the Caribbean a Help or a Hindrance?

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  • Dolabella, Marcelo
  • Mesquita Moreira, Mauricio

Abstract

The dire prospects of global warming have been increasing the pressure on policymakers to use trade policy as a mitigation tool, challenging trade economists canonical “targeting principle.” Even though the justifications for this stance remain as valid as ever, it no longer seems feasible in a world that is already engaging actively in using trade policy for climate purposes. However, the search for second-best solutions remains warranted. In this paper, we focus on the climate benefits of tariff reform for a broad sample of Latin American and Caribbean countries, drawing on Shapiros (2021) insights about the environmental bias of trade policy. Using a partial equilibrium approach and GTAP 10-MRIO data for 2014, we show that even though there is evidence of a negative bias toward “dirty goods” in half of the countries studied, translating this into actionable tariff reforms is plagued by interpretation and implementation difficulties, as well as by jurisdictional and efficiency trade-offs. There are also questions about their efficacy in curbing greenhouse gas emissions.

Suggested Citation

  • Dolabella, Marcelo & Mesquita Moreira, Mauricio, 2022. "Fighting Global Warming: Is Trade Policy in Latin America and the Caribbean a Help or a Hindrance?," IDB Publications (Working Papers) 12384, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:12384
    DOI: http://dx.doi.org/10.18235/0004426
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    References listed on IDEAS

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    2. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    3. van Leeuwen, Nico & Robert McDougall, 2010. "International Marine Bunkers: An Attempt to Assign its Usage to the Right Countries," GTAP Research Memoranda 3445, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    4. Cherniwchan, Jevan, 2017. "Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing," Journal of International Economics, Elsevier, vol. 105(C), pages 130-149.
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    More about this item

    Keywords

    International trade; Latin America and the Caribbean; Latin America andthe Caribbean;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • 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

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