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Wanted! Free Trade Agreements in the Service of Environmental and Climate Protection

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  • Julia Grübler
  • Roman Stöllinger
  • Gabriele Tondl

Abstract

The effects of international trade on the planet’s climate and environment are manifold and complex. This makes assessment of the impact of free trade agreements (FTAs) a delicate matter. This study provides an overview of the development of sustainability chapters in FTAs and discusses their potential and limitations. It highlights particular industry-specific environmental issues related to EU trade, especially with developing countries, and presents complementary policy options. In this vein, it zooms in on the EU-Mercosur FTA, for which a political agreement was reached in June 2019. It contrasts the estimated cost of increased CO2 emissions attributable to intensified trade relations, as one element of the ‘pains from trade’, with the estimated ‘gains from trade’ arising from lower prices for consumers. The analysis suggests that the benefits outweigh the costs; yet, the result is sensitive to assumed prices for pollutants. Furthermore, the effectiveness of the incorporated sustainability chapter is limited by its enforceability. The latter provokes a discussion on the modernisation of the framework of the World Trade Organization, which currently does not allow environmental challenges to be tackled effectively.

Suggested Citation

  • Julia Grübler & Roman Stöllinger & Gabriele Tondl, 2021. "Wanted! Free Trade Agreements in the Service of Environmental and Climate Protection," FIW Research Reports series 2, FIW.
    • Handle: RePEc:wsr:ecbook:y:2021:m:01:i:2
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    References listed on IDEAS

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    1. Wilson,John S. & Tsunehiro Otsuki & Sewadeh, Mirvat, 2002. "Dirty exports and environmental regulation : do standards matter to trade?," Policy Research Working Paper Series 2806, The World Bank.
    2. Timmer, Marcel P. & Los, Bart & Stehrer, Robert & de Vries, Gaaitzen J., 2016. "An Anatomy of the Global Trade Slowdown based on the WIOD 2016 Release," GGDC Research Memorandum GD-162, Groningen Growth and Development Centre, University of Groningen.
    3. Kirsten S. Wiebe & Norihiko Yamano, 2016. "Estimating CO2 Emissions Embodied in Final Demand and Trade Using the OECD ICIO 2015: Methodology and Results," OECD Science, Technology and Industry Working Papers 2016/5, OECD Publishing.
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    More about this item

    Keywords

    trade policy; WTO; Free trade agreements; MERCOSUR; environment; sustainability;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • 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
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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