Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes?

Nuno Limão

Chapter 9 in Policy Externalities and International Trade Agreements, 2018, pp 257-281 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We analyze whether linking international cooperation in trade policy to environmental policy (or other issues with nonpecuniary externalities) promotes more cooperation in both policies, or whether cooperation in one is strengthened at the expense of the other. In the context of self-enforcing agreements, we show that if the policies are independent in the government’s objective function, then linkage promotes cooperation in one policy at the expense of the policy that is easier to enforce under no-linkage. However, if the linked policies are not independent and if these policies are strategic complements, then linkage can sustain more cooperation in both issues than no-linkage. The policies are strategic complements only if (i) the production externality has cross-border effects; (ii) the weight on the externality cost is high; (iii) import competing lobbies are not “powerful”.

Keywords: Trade; International Trade; WTO; World Trade Organization; Investment; Globalization; Externality; Policy; Cooperation (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2018
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Related works:
Journal Article: Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes? (2005)
Working Paper: Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes? (2002)
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