IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v47y2024i2p779-805.html
   My bibliography  Save this article

Does trade policy help or hinder global warming? A case study of Latin America and the Caribbean

Author

Listed:
  • Mauricio Mesquita Moreira
  • Marcelo Dolabella

Abstract

The dire prospects of global warming have been increasing the pressure on policymakers to use trade policy as a mitigation tool, challenging trade economists' canonical ‘targeting principle’. Even though the justifications for this stance remain as valid as ever, it no longer seems feasible in a world that is already engaging actively in using trade policy for climate purposes. However, the search for second‐best solutions remains warranted. In this paper, we focus on the climate benefits of tariff reform for a broad sample of Latin American and Caribbean countries, drawing on Shapiro's (2021, The Quarterly Journal of Economics, 136, 831) insights about the environmental bias of trade policy. Using a partial equilibrium approach and GTAP‐MRIO data for 2014, we show that even though there is evidence of a negative bias towards ‘dirty goods’ in half of the countries studied, translating this into actionable tariff reforms is plagued by interpretation and implementation difficulties, as well as by jurisdictional and efficiency trade‐offs. There are also questions about their efficacy in curbing greenhouse gas emissions.

Suggested Citation

  • Mauricio Mesquita Moreira & Marcelo Dolabella, 2024. "Does trade policy help or hinder global warming? A case study of Latin America and the Caribbean," The World Economy, Wiley Blackwell, vol. 47(2), pages 779-805, February.
    • Handle: RePEc:bla:worlde:v:47:y:2024:i:2:p:779-805
    DOI: 10.1111/twec.13449
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/twec.13449
    Download Restriction: no
    File URL: https://libkey.io/10.1111/twec.13449?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Joseph S Shapiro, 2021. "The Environmental Bias of Trade Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 831-886.
    2. Feodora Teti, 2020. "30 Years of Trade Policy: Evidence from 5.7 Billion Tariffs," ifo Working Paper Series 334, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    3. Weitzel, Matthias & Hübler, Michael & Peterson, Sonja, 2012. "Fair, optimal or detrimental? Environmental vs. strategic use of border carbon adjustment," Energy Economics, Elsevier, vol. 34(S2), pages 198-207.
    4. José-Luis Cruz & Esteban Rossi-Hansberg, 2024. "The Economic Geography of Global Warming," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(2), pages 899-939.
    5. Niven Winchester, 2018. "Can tariffs be used to enforce Paris climate commitments?," The World Economy, Wiley Blackwell, vol. 41(10), pages 2650-2668, October.
    6. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    7. Cherniwchan, Jevan, 2017. "Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing," Journal of International Economics, Elsevier, vol. 105(C), pages 130-149.
    8. Peters, Glen P., 2008. "From production-based to consumption-based national emission inventories," Ecological Economics, Elsevier, vol. 65(1), pages 13-23, March.
    9. Niven Winchester, 2012. "The Impact of Border Carbon Adjustments Under Alternative Producer Responses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 354-359.
    10. Christoph Böhringer & Carolyn Fischer & Knut Einar Rosendahl & Thomas Fox Rutherford, 2022. "Potential impacts and challenges of border carbon adjustments," Nature Climate Change, Nature, vol. 12(1), pages 22-29, January.
    11. Cornick, Jorge & Frieden, Jeffry & Mesquita Moreira, Mauricio & Stein, Ernesto H., 2022. "Political Economy of Trade Policy in Latin America," IDB Publications (Books), Inter-American Development Bank, number 11953, December.
    12. Gutiérrez, Emilio & Teshima, Kensuke, 2018. "Abatement expenditures, technology choice, and environmental performance: Evidence from firm responses to import competition in Mexico," Journal of Development Economics, Elsevier, vol. 133(C), pages 264-274.
    13. Paul A. Samuelson, 1951. "A Comment on Factor Price Equalisation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 19(2), pages 121-122.
    14. Christoph Böhringer & Carolyn Fischer & Knut Einar Rosendahl & Thomas Fox Rutherford, 2022. "Author Correction: Potential impacts and challenges of border carbon adjustments," Nature Climate Change, Nature, vol. 12(4), pages 408-408, April.
    15. Jose Nuno-Ledesma & Nelson B. Villoria, 2019. "Estimating International Trade Margins Shares by Mode of Transport for the GTAP Data Base," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(1), pages 28-49, June.
    16. Samuel Kortum & David Weisbach, 2017. "The Design of Border Adjustments for Carbon Prices," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(2), pages 421-446, June.
    17. Aaron Cosbey & Susanne Droege & Carolyn Fischer & Clayton Munnings, 2019. "Developing Guidance for Implementing Border Carbon Adjustments: Lessons, Cautions, and Research Needs from the Literature," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 13(1), pages 3-22.
    18. Angel Aguiar & Maksym Chepeliev & Erwin L. Corong & Robert McDougall & Dominique van der Mensbrugghe, 2019. "The GTAP Data Base: Version 10," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(1), pages 1-27, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Larch, Mario & Wanner, Joschka, 2024. "The consequences of non-participation in the Paris Agreement," European Economic Review, Elsevier, vol. 163(C).
    2. Clora, Francesco & Yu, Wusheng & Corong, Erwin, 2023. "Alternative carbon border adjustment mechanisms in the European Union and international responses: Aggregate and within-coalition results," Energy Policy, Elsevier, vol. 174(C).
    3. Tian Lan & Ran Tao, 2024. "Research on the Inhibitory Effect of the EU’s Carbon Border Adjustment Mechanism on Carbon Leakage," Sustainability, MDPI, vol. 16(17), pages 1-21, August.
    4. Dolabella, Marcelo & Mesquita Moreira, Mauricio, 2022. "Fighting Global Warming: Is Trade Policy in Latin America and the Caribbean a Help or a Hindrance?," IDB Publications (Working Papers) 12384, Inter-American Development Bank.
    5. Lai, Yu-Bong, 2024. "Policy linkages, country size, and international capital distribution," Journal of Environmental Economics and Management, Elsevier, vol. 123(C).
    6. Stefano Carattini & Giseong Kim & Givi Melkadze & Aude Pommeret, 2023. "Carbon Taxes and Tariffs, Financial Frictions, and International Spillovers," CESifo Working Paper Series 10851, CESifo.
    7. Ambec, Stefan & Esposito, Federico & Pacelli, Antonia, 2024. "The economics of carbon leakage mitigation policies," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    8. Fernández-Amador, Octavio & Francois, Joseph F. & Oberdabernig, Doris A. & Tomberger, Patrick, 2023. "Energy footprints and the international trade network: A new dataset. Is the European Union doing it better?," Ecological Economics, Elsevier, vol. 204(PA).
    9. Bellora, Cecilia & Fontagné, Lionel, 2023. "EU in search of a Carbon Border Adjustment Mechanism," Energy Economics, Elsevier, vol. 123(C).
    10. Perdana, Sigit & Vielle, Marc, 2022. "Making the EU Carbon Border Adjustment Mechanism acceptable and climate friendly for least developed countries," Energy Policy, Elsevier, vol. 170(C).
    11. Y.-H. Henry Chen & Hossein Hosseini Jebeli & Craig Johnston & Sergey Paltsev & Marie-Christine Tremblay, 2023. "An Investigation into the Effects of Border Carbon Adjustments on the Canadian Economy," Staff Working Papers 23-27, Bank of Canada.
    12. Zheng Wang, 2021. "Blame the Foreigners? Exports and Sulfur Dioxide Emissions in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(2), pages 279-309, October.
    13. Gabriel Felbermayr & Sonja Peterson & Joschka Wanner, 2022. "The Impact of Trade and Trade Policy on the Environment and the Climate. A Review," WIFO Working Papers 649, WIFO.
    14. Frikk Nesje & Robert C. Schmidt & Moritz A. Drupp & Robert Christian Schmidt, 2024. "Designing Carbon Pricing Policies Across the Globe," CESifo Working Paper Series 11424, CESifo.
    15. Mario Larch & Joschka Wanner, 2019. "The Consequences of Unilateral Withdrawals from the Paris Agreement," CESifo Working Paper Series 7804, CESifo.
    16. Campolmi, Alessia & Fadinger, Harald & Forlati, Chiara & Stillger, Sabine & Wagner, Ulrich, 2023. "Designing Effective Carbon Border Adjustment with Minimal Information Requirements. Theory and Empirics," CEPR Discussion Papers 18645, C.E.P.R. Discussion Papers.
    17. Aliénor Cameron & Marc Baudry, 2023. "The case for carbon leakage and border adjustments: where do economists stand?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 435-469, July.
    18. J. G. Fournier Gabela & F. Freund, 2023. "Potential carbon leakage risk: a cross-sector cross-country assessment in the OECD area," Climatic Change, Springer, vol. 176(5), pages 1-21, May.
    19. Javier Flórez Mendoza & Oliver Reiter & Robert Stehrer, 2024. "EU carbon border tax: General equilibrium effects on income and emissions," wiiw Working Papers 254, The Vienna Institute for International Economic Studies, wiiw.
    20. Leisner, Jonathan & Munch, Jakob R. & Nielsen, August Twile & Schaur, Georg, 2023. "The Impact of Offshoring and Import Competition on Firm-Level Carbon Emissions," IZA Discussion Papers 16556, Institute of Labor Economics (IZA).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:47:y:2024:i:2:p:779-805. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.