Contingent Trade Agreements

Bard Harstad

No 32392, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There are often conflicts between proponents of trade and environmental activists. This paper shows, however, how trade agreements can be designed so as to motivate environmental conservation. I first analyze a standard trade model, where resource exploitation (e.g., deforestation) is a trade-specific investment that causes environmental damage. In this model, traditional trade agreements will cause more exploitation. Next, I investigate the extent to which conservation can be motivated by a contingent trade agreement (CTA), where default tariffs can vary with changes in the resource stock (e.g., the forest cover). The model permits many products, countries, and collaborators. A numerical example suggests that growth and liberalization can cause Brazil's agricultural area to expand by 27%, but this expansion can be avoided if the EU and the US offer a CTA.

JEL-codes: F13 F18 F55 Q37 Q56 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-agr, nep-env and nep-int
Note: EEE ITI POL
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Citations: View citations in EconPapers (1)

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