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Aparna Sawhney                                                                                 MA(World Economy) CITD

International Trade, Environment and Multilateral Institutions

Course Description:

This course focuses exclusively on international trade, environmental issues and multilateral governing institutions.  It begins by examining the underlying theories and empirics on the trade-environment literature, the use of environmental policy instruments for global environmental problems, development of the eco-industry (environmental goods and services), multilateral regime rules on managing trade and environment overlaps, and finally the current negotiations on trade-environment governance rules under the World Trade Organization.   

The different modules will cover traditional trade theory with environmental dimensions; the use of first best environmental policy instruments and second best trade instruments in such models; the competitiveness impact of environmental regulation on goods trade and factor movement; linked-negotiation models /games of trade and environment; the relationship between WTO rules and trade measures in Multilateral Environmental Agreements, and the current WTO negotiations on environmental goods and services. 

Evaluation: Midterm (40% of grade), Class presentations (10%) and End-term examination (50% of grade) 

The three broad modules and basic readings for each are outlined below:

I. Introduction

  • Daly, Herman (1968) “On economics as a life science”, The Journal of Political Economy, Volume 76(3): 392-406.
  • d’Arge, Ralph C. (1975) “On the Economics of Transnational Environmental Externalities”, in Edwin S. Mills ed. Economic Analysis of Environmental Problems, National Bureau of Economic Research.
  • d’Arge, Ralph C. and Allen V. Kneese (1972) “Environmental Quality and International Trade”, International Organization, 26 (2): 419-465.
  • Stevens, Candice (1993) “The Environmental Effects of Trade” The World Economy, 16(4): 439-451.

II. Theory and Empirics of International Trade-Environment Interface

II.1  Environmental Policy and Comparative Advantage in International Trade

  • Pethig, Rüdiger (1976) “Pollution, Welfare, and Environmental Policy in the Theory of Comparative Advantage”, Journal of Environmental Economics and Management, 2: 160-169.
  • Baumol, William and Wallace Oates (1988) “International Environmental Issues” (chapter 16) in Baumol and Oates The Theory of Environmental Policy, Cambridge University Press.
  • Ulph, Alistair (1992) “The Choice of Environmental Policy Instruments and Strategic International Trade” Chapter 5 in Rudiger Pethig ed. Conflicts and Cooperation in Managing Environmental Resources, Springer Verlag: 111-129.

II.2  Natural Resource Management and International Trade

  • Kemp, Murray C. and Ngo Van Long (1984) “The Role of Natural Resources in Trade Models” in R. W. Jones & P. B. Kenen (ed.) Handbook of International Trade, Volume 1(1), Elsevier.
  • Copeland, Brian (2005) “Policy Endogeneity and the Effects of Trade on the Environment”, Agricultural and Resource Economics Review, Volume 34(1): 1-15.

II.3  Empirics on Environmental Stringency and International Trade

  • Jaffe, Adam, Steven Peterson, Paul Portney and Robert Stavins (1995) “Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?”, Journal of Economic Literature, 33: 132-163.
  • Cole, Matthew and Robert J. R. Elliott (2003) “Do Environmental Regulations Influence Trade Patterns: Testing Old and New Trade Theories”, The World Economy: 1163-86.
  • Busse, Matthias (2004) “Trade, Environmental Regulations and the World Trade Organization: New Evidence”, World Bank Policy Research Working Paper No. 3361.
  • Xing, Yuquing and Charles D. Kolstad (2002) “Do Lax Environmental Regulations Attract Foreign Investment?” Environmental and Resource Economics, 21: 1-22.
  • Levinson, Arik and M. Scott Taylor (2008) “Unmasking the Pollution Haven Effect”, International Economic Review 49(1): 223-254.

III.  Multilateral Trade and Environmental Regimes and Negotiations

III.1  Multilateral Environmental Agreements and International Trade in Pollution Rights

  • Barrett, Scott and Stavins, Robert (2003) “Increasing Participation and Compliance in International Climate Change Agreements”, International Environmental Agreements: Politics, Law and Economics, 3: 349-376.
  • Barrett, Scott (2008) “Climate Treaties and the imperative of enforcement”, Oxford Review of Economic Policy, Volume 24 (2): 239-258.

III.2  Linking Trade and Environment Negotiations – WTO and the MEAs

  • Abrego, Lisandro, C. Perroni, J. Whalley, and R. Wigle (2001) “Trade and Environment: Bargaining Outcomes from Linked Negotiations”, Review of International Economics, 9(3): 414-428.
  • Hauer, Grant and C. Runge (1999) “Trade-Environment Linkages in the Resolution of Transboundary Externalities”, World Economy: 25-39.
  • Vogel, David (2002) “The WTO, International Trade, and Environmental Protection: European and American Perspectives”, in Norman Vig and Michael Faure ed. Green Giants? Environmental Policy of the United States and the European Union.

III.3 The Eco-industry and WTO negotiations in Environmental Goods and Services

  • Barton, J. R. (1997) “The North-South Dimension of Environment and Cleaner Technology Industries”, Discussion Paper 9803, Institute for New Technologies, United Nations University, Maastricht, The Netherlands.
  • David, Maia and Bernard Sinclair-Desgagné (2005) “Environmental Regulation and the Eco-Industry,” Journal of Regulatory Economics, Volume 28: 141-155.
  • Avery, Brock and Fred Boadu (2004) “Global Demand for US Environmental Goods and Services”, Journal of Agricultural and Applied Economics, 36(1): 49-64.
  • Bernard Sinclair-Desgagné (2008) “The Environmental Goods and Services Industry”, International Review of Environmental and Resource Economics, Volume 2(1): 69-99.
  • Jha, Veena (2008). “Environmental Priorities and Trade Policy for Environmental Goods: A Reality Check”, ICTSD EGS Series, Issue Paper No. 7, ICTSD.

Recommended books

Baumol, William and Wallace Oates (1988) The Theory of Environmental Policy, Cambridge University Press.
Jeroen C. J. M vanden Berger ed. (1998) Handbook of Environmental and Resource Economics, Edward Elgar Publishers.