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Free Trade Agreements with Environmental Standards

Hideo Konishi (), Minoru Nakada and Akihisa Shibata ()

No 972, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In this paper, we investigate the effects of a free trade agreement (FTA) with environmental standards between Northern and Southern countries, with explicit considerations for transferring clean technology and enforcing reduced emissions. Southern producers benefit greatly by having access to a Northern market without barriers, while they are reluctant to use new high-cost, clean technology provided by the North. Thus, environmentally conscious Northern countries should design an FTA where Southern countries provide sufficient benefits for the membership while imposing tighter enforcement requirements. Since including too many Southern countries dilutes the benefits of being a member of the FTA, it is in the best interest of the North to limit the number of Southern memberships while requiring strict enforcement of emissions reduction. This may result in unequal treatment among the Southern countries. We provide a quantitative evaluation of FTA policies by using a numerical example.

Keywords: free trade agreement; technology standard; North-South model; environmental standard (search for similar items in EconPapers)
JEL-codes: F18 Q54 Q55 Q56 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-int
Date: 2018-09-22
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