Intra-industry trade in intermediate products,pollution and internationally increasing returns

This paper examines the relationship between intra-industry trade in intermediate products, pollution and increasing returns. We develop a two-country model in which production occurs in two stages, final and intermediate good production. Intermediate goods are produced under monopolistic competition and final good production exhibits increasing returns with respect to the number of varieties of intermediates. Pollution occurs in the production of the final good when polluting intermediates are used. We analyze the effects of international trade in intermediate products on pollution, output and welfare under an endogenous tax scenario and with two types of pollution functions. The results show that, because of increasing returns, international trade either leads to lower total pollution in each country or lower pollution per unit of output in at least one country. In addition, intra-industry trade causes countries to import the environmental quality of their trading partners.     

North–south trade in reusable goods: Green design meets illegal shipments of waste

In a stylized model of international trade, firms in the North indirectly export second-hand products to a representative firm in the South to be reused as intermediate goods, with potential trade gains. The level of reusability of waste products – or green design – is a crucial choice variable in the North. This is because, in the presence of imperfect international monitoring, non-reusable waste can be illegally mixed with reusable waste. I explore the driving forces for illegal waste movement, with a particular focus on local waste regulations such as the EU׳s Directive on Waste Electrical and Electronic Equipment. Under mild conditions, it is shown that increasingly stringent regulations in the North can induce Northern firms to reduce product reusability. Consequently, the flow of non-reusable waste to the South increases, magnifying the pollution haven effect.     

On the environmental consequences of intra-industry trade

In the trade and environment debate, the relevance of examining the impact of a location's intra-industry trade (IIT) on environmental quality cannot be overemphasized, in part, due to the increasing prominence of such trade and the paucity of related empirical evidence. Although existing studies largely indicate overall trade to be pro-environment, the consequences of IIT may differ owing to greater varieties of intermediate and final goods, easier technology diffusion via trade in similar goods, productivity gains from within-sector reallocations, and increased innovation. However, identification of the causal effect is plagued by the potential endogeneity of IIT attributable to crucial unobservables and measurement error. In this light, utilizing an instrumental variables strategy and data on multiple environmental indicators from roughly 200 countries over 2000-2005, we investigate IIT's impact on the environment. To measure IIT, we rely on two indexes of within-industry specialization based on changes in and levels of sector-level trade. Regardless of the indicator of IIT or environmental performance, across several sets of instruments, we mostly find (i) IIT to benefit the environment, (ii) overall trade to be less pro-environment than IIT, and (iii) concerns over endogeneity to be relevant.     

Substitution and the control of pollution : A comparison of effluent charges and quantity standards under uncertainty

Single-valued price and quantity controls of a polluting activity are compared under uncertainty. The ability to substitute other inputs for the pollutant in the production of a positively valued final good, and the usual discrepancy between the amount of pollution actually consumed and the amount emitted are carefully incorporated. The first is found to influence the degree to which cost fluctuation is reflected in the output of the final good. The second concern alters the region of the benefit function into which output is inserted. Both change the welfare losses associated with random fluctuation in the costs of reducing pollution.     

Domestic dynamics of crop production in response to international food trade: evidence from soybean imports in China

ABSTRACT

International food trade plays an important role in food security, but little research has been devoted to studying crop dynamics in importing countries caused by trade. We studied the spatiotemporal patterns of soybean planting area in China (the largest soybean importing country) in response to soybean imports. The results show how the soybean planting area from 1980 to 2012 in China is dominated by two temporal patterns, both of which first increased, then decreased, with an 8-year time lag. The first increasing-decreasing pattern is affected by increasing soybean imports, and the second increasing-decreasing pattern is driven by decreasing domestic soybean profits. The results also show spatially distinct spatial patterns: soybean planting area decreased in southeastern China while it increased in northwestern China. Our analysis of soybean planting area helps China and other food-importing countries understand spatiotemporal responses of domestic agricultural cultivations caused by international food trade and agricultural pollution management.     

Pollution havens and industrial agglomeration

This paper examines the pollution haven hypothesis using a spatial-economy model of two countries and two sectors. The manufacturing sector generates cross-border pollution which reduces cross-sectoral productivity of agricultural goods, and lowers local income. We derive a demand-reducing effect that discourages firms to move to the country with laxer environmental regulations, in the absence of any comparative advantage. Our analysis also demonstrates that manufacturing agglomeration forces can alleviate the pollution-haven effect: a pollution haven may not arise if environmental regulation is slightly more stringent in the larger country.     

Trade and Transboundary Pollution: Spatial Separation Reconsidered

Copeland and Taylor (1999, J. Int. Econ.47, 137–168) show that trade allows the spatial separation of two incompatible industries. Concentrating the polluting industry in one country eliminates its degenerative effects in the other. This paper extends the analysis by allowing for transboundary pollution. Thus specialization has indirect repercussions on the level of pollution in the other country. We show (i) how cross-national differences in exposure to pollution emissions can generate comparative advantage and (ii) under what condition the resulting trading pattern combined with transboundary pollution can increase pollution exposure with negative effects on productivity and welfare in both countries.     

Economic growth,international trade,and the depletion or conservation of renewable natural resources

Conservation of renewable natural resources and promotion of economic growth are both sustainable development goals. Here, we study the interdependency between economic growth, international trade, and the use of renewable natural resources—under alternative institutional settings of either open access or full property rights—in an endogenous growth model. We find that if the resource is depleted over time, consumption growth is reduced. Economic growth and international trade only impact resource use when the resource is harvested under full property rights. Then, widening international trade can lead countries to shift from conservation to depletion. Changes in the institutional setting of resource use in one country may have repercussions on trading partners. Our results indicate potential trade-offs between the sustainable development goals and imply that policies focusing on resource use or trade (e.g., international trade bans or certified trade) are not sufficient to prevent resource depletion.     

The environmental effects of trade within and across sectors

This paper presents a model that combines within and across sector channels through which trade affects our environment by embedding heterogeneous firms and fixed costs into a two-sector framework with an endogenous response to environmental policy. In contrast to existing literature that tends to examine these channels separately, the combined framework developed here shows how cross-sector comparative advantage and within-sector responses to trade and environmental policy or factor endowments interact to affect our environment through three channels: changes in output, cross-sector market share, and emissions intensity. In contrast to a single-sector model with neutral productivity, consideration of two sectors allows for trade liberalization to affect the allocation of inputs in each sector and thereby affect total pollution output. The additional consideration of heterogeneous firm responses to falling trade costs will generate endogenous increases in productivity that increase output, reduce aggregate emissions intensity, and moderate the cross-sector resource adjustment, relative to a representative-firm model. Simulation results show how the combined framework can replicate existing empirical outcomes, and provide concise ceteris paribus insights regarding the potential role of trade and environmental policy changes and factor expansion in driving observed outcomes and their contribution to each of the three channels.     

Pollution control and inputs to production

The primary concern of this paper is to identify the inputs required for air, water, and solid waste pollution abatement in the United States. Industry level data on pollution abatement expenditures in 1976 are decomposed into expenditures on various intermediate inputs and on two primary inputs—labor and capital. The 1971 input-output table is adjusted to reflect the input needs of pollution abatement technology. This revised direct input coefficients matrix is used to derive the gross output and primary input requirements of the 1971 final bill of goods.     

Pollution Haven and Corruption Paradise

In this paper, we present a simple theoretical extension from the Economic Geography literature to characterize the main features of pollution havens (lax environmental regulation, good market access to high-income countries and corruption opportunities). Using structural and reduced-form estimations, we find that pollution havens are not a “popular myth” for European firms, laxer environmental standards significantly explain the location choice of polluting affiliates. We analyze in depth the role of trade costs (using various bilateral and multilateral measures), a 1% increase in access to the European market from a pollution haven fosters relocation there by 0.1%. We also find that corruption lowers environmental standards, which strongly attract polluting firms: a 1% increase of corruption fuels relocation by 0.28%. We test the economic significance of these empirical findings via simulations. The protection of the European market (e.g., a carbon tax on imports) to stop relocations to pollution havens must be high (a decrease of the European market for Morocco and Tunisia equivalent to 13%) not to say prohibitive (31% for China).     

Does trade openness improve environmental quality?

The literature on trade openness, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study treats trade and income as endogenous and estimates the overall impact of trade openness on environmental quality using the instrumental variables technique. We find that whether or not trade has a beneficial effect on the environment varies depending on the pollutant and the country. Trade is found to benefit the environment in OECD countries. It has detrimental effects, however, on sulfur dioxide (SO₂) and carbon dioxide (CO₂) emissions in non-OECD countries, although it does lower biochemical oxygen demand (BOD) emissions in these countries. We also find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term.     

Achieving environmental goals in a world of trade and hidden action: the role of trade policies and eco-labeling

Importing countries often resort to trade policies and consumer actions in order to reduce negative environmental impacts of the products they consume. Traditionally, these policies were non-discriminatory, i.e., they treated all imports equally, without considering the actual damages caused by the product. More recently, there is a trend towards process-discriminatory policies which attempt to discriminate against environmentally unsound imports while encouraging sound alternatives. We develop a theoretical model of the consuming country's optimal trade policy, allowing for asymmetric information and costly monitoring, and analyze what type of policy is preferable under what conditions.     

Growth, environment and innovation—a model with production vintages and environmentally oriented research

I develop an innovative environmental new growth model driven by researchers striving for monopoly profits. Skilled labour is allocated between production vintages and two forms of research, ordinary and environmentally oriented. The intermediate sector includes fixed costs and decreasing returns, limiting the number of vintages used. I solve for planner's, laissez-faire, and regulator's solutions, and examine welfare implications and the various distortions in the model (monopoly power, knowledge spillovers, business stealing, environmental externalities). A regulator may wish: (i) to encourage environmentally oriented research; (ii) to concentrate production labour on recent (cleaner) vintages; (iii) to switch labour from production to research. An environmental sales tax may under some circumstances achieve all three—such taxes not only give incentives to reduce pollution, but also shift profits from old vintages to new, thus raising incentives to come up with newer (cleaner) vintages. An environmental tax may even lead to an increase in the rate of production growth.     

The backward incidence of pollution control—some comparative statics in general equilibrium

The backward incidence of stronger pollution controls onto the factors of production is examined in a two sector (one polluting, one not), general equilibrium model. The real returns to labor and capital are found to move in opposite directions that depend on the factor intensity of the nonpolluting sector. The magnitudes of these effects are shown dependent upon the degree of factor intensity in that sector, the ease with which pollution can be removed from the effluent, the ease with which capital and labor can be substituted in either sector, and the price elasticities of demand for the sectors' products.     

Expansion of sugarcane ethanol production in Brazil: environmental and social challenges.

Several geopolitical factors, aggravated by worries of global warming, have been fueling the search for and production of renewable energy worldwide for the past few years. Such demand for renewable energy is likely to benefit the sugarcane ethanol industry in Brazil, not only because sugarcane ethanol has a positive energetic balance and relatively low production costs, but also because Brazilian ethanol has been successfully produced and used as biofuel in the country since the 1970s. However, environmental and social impacts associated with ethanol production in Brazil can become important obstacles to sustainable biofuel production worldwide. Atmospheric pollution from burning of sugarcane for harvesting, degradation of soils and aquatic systems, and the exploitation of cane cutters are among the issues that deserve immediate attention from the Brazilian government and international societies. The expansion of sugarcane crops to the areas presently cultivated for soybeans also represent an environmental threat, because it may increase deforestation pressure from soybean crops in the Amazon region. In this paper, we discuss environmental and social issues linked to the expansion of sugarcane in Brazil for ethanol production, and we provide recommendations to help policy makers and the Brazilian government establish new initiatives to produce a code for ethanol production that is environmentally sustainable and economically fair. Recommendations include proper planning and environmental risk assessments for the expansion of sugarcane to new regions such as Central Brazil, improvement of land use practices to reduce soil erosion and nitrogen pollution, proper protection of streams and riparian ecosystems, banning of sugarcane burning practices, and fair working conditions for sugarcane cutters. We also support the creation of a more constructive approach for international stakeholders and trade organizations to promote sustainable development for biofuel production in developing countries such as Brazil. Finally, we support the inclusion of environmental values in the price of biofuels in order to discourage excessive replacement of natural ecosystems such as forests, wetlands, and pasture by bioenergy crops.     

Combating the Illegal Trade in African Elephant Ivory with DNA Forensics

Abstract:  International wildlife crime is burgeoning in this climate of global trade. We contend that the most effective way to contain this illegal trade is to determine where the wildlife is being removed. This allows authorities to direct law enforcement to poaching hot spots, potentially stops trade before the wildlife is actually killed, prevents countries from denying their poaching problems at home, and thwarts trade before it enters into an increasingly complex web of international criminal activity. Forensic tools have been limited in their ability to determine product origin because the information they can provide typically begins only at the point of shipment. DNA assignment analyses can determine product origin, but its use has been limited by the inability to assign samples to locations where reference samples do not exist. We applied new DNA assignment methods that can determine the geographic origin(s) of wildlife products from anywhere within its range. We used these methods to examine the geographic origin(s) of 2 strings of seizures involving large volumes of elephant ivory, 1 string seized in Singapore and Malawi and the other in Hong Kong and Cameroon. These ivory traffickers may comprise 2 of the largest poaching rings in Africa. In both cases all ivory seized in the string had common origins, which indicates that crime syndicates are targeting specific populations for intense exploitation. This result contradicts the dominant belief that dealers are using a decentralized plan of procuring ivory stocks as they became available across Africa. Large quantities of ivory were then moved, in multiple shipments, through an intermediate country prior to shipment to Asia, as a risk-reduction strategy that distances the dealer from the poaching locale. These smuggling strategies could not have been detected by forensic information, which typically begins only at the shipping source.     

Climate and international trade policies when emissions affect production possibilities

In this paper, we develop a model of international trade and climate change in which emission discharges arising from production have a feedback effect on national production sectors by impacting upon effective factor endowments. With this context, the objectives are, first, to provide a general characterization of Pareto-efficient climate and trade policies and, second, to examine the possibility – starting from non-Pareto-efficient equilibria – for Pareto-improving environmental policies. We provide conditions under which several particular reforms of carbon taxes are welfare improving.     

Trading rules and the environment: Does equal treatment lead to a cleaner world?

In this paper, we consider a three-stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform (Most Favored Nation, MFN) tariffs on countries’ choice over environmental standards for varying degrees of pollution spillovers. Because of the presence of punishment effects and stronger own and cross-tariff effects, we find that discrimination yields higher standards than MFN (and free trade) independently of the extent of pollution spillovers. When pollution is local and incentives to free ride on other countries’ abatement efforts are weak, we show, however, that welfare is larger under MFN than under discrimination. In a dynamic setting, we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement (IEA) and obtain that multilateral cooperation is easier to sustain under discrimination than under MFN (or free trade).     

International competitive displacement from environmental control The quantitative gains from methodological refinement

This paper demonstrates empirically the gain from adopting more general equilibrium approaches in projecting the effects on domestic output and international trade of environmental controls. The suggested models include a partial equilibrium case where all industries are treated independently, an intermediate case incorporating effects in supplying industries, and general equilibrium formulations based on alternative macroeconomic conditions. U. S. data is used to evaluate these models. Under both pollutor pays and subsidy financing schemes, moving from the simplest case to the intermediate model results in quite different industry projections. Including macroeconomic factors appears particularly important in the classical setting.