The trade effects of environmental provisions in preferential trade agreements

Berger, Axel / Clara Brandi / Jean-Frédéric Morin / Jakob Schwab
Externe Publikationen (2020)

in: Beverelli, Cosimo / Jürgen Kurz / Damian Raess (Eds.), International Trade, Investment, and the Sustainable Development Goals, Cambridge: Cambridge University Press, 111-139

DOI: https://doi.org/10.1017/9781108881364.006
Information

The international community has acknowledged that international trade can be an effective means of helping to achieve the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs). Traditionally, preferential trade agreements (PTAs) were designed to promote trade flows. PTAs have become more comprehensive and now also cover non-economic policy areas, such as the environment. This chapter examines whether the inclusion of environmental provisions in PTAs changes the observed overall positive contribution that PTAs make to economic outcomes and thereby to the economic objectives of the SDGs. Specifically, we ask whether the inclusion of environmental provisions in PTAs reduces export flows between PTA partner countries. Using a novel data set on environmental provisions in PTAs, we estimate gravity type panel regressions. We find that membership in PTAs including more environmental provisions is associated with less trade among trade partners compared to PTAs that include less or no environmental provisions. This negative effect of environmental provisions is fully driven by the negative effect on South–North trade flows, i.e. exports from developing to high-income countries.