Working Papers

Solleder J-M. (2018) Market Power and Export Taxes, FERDI Working paper P237, October.

Abstract:

This paper explores the extent to which market power considerations explain levels of export taxes. Market power is proxied by the inverse import demand elasticities faced by exporters. The paper first provides estimates of market power for exporting countries and products at the 6-digit level of the Harmonized System. It then finds a positive correlation between market power and export taxes. This result supports the theory that, when unconstrained in their trade policy choices, countries take their market power into account when setting their export taxes.


de Melo J., Solleder J.M. (2018) The EGA Negotiations: why they are important, why they are stalled, and challenges ahead, FERDI Working paper P236, October.

Abstract:

Decade-long negotiations on the reduction of tariffs on Environmental Goods (EGs) at the Doha Round using a list approach to define EGs, failed to produce an agreement. In July 2014, 14 countries entered plurilateral negotiations under the ambit of the WTO. If successful, the resulting Environmental Goods Agreement (EGA) would have eliminated tariffs on a list of EGs.  These negotiations broke down in December 2016. The chapter documents this episode and the mercantilistic behavior of negotiators that prevented agreement on an extended list of EGs, a requirement to conclude a meaningful outcome for the environment.

A conclusion of the EGA negotiations under the current narrow agenda focusing only on tariffs could help build trust to go further but would be insufficient to help mitigate climate change, even if a ‘critical mass’ were to be reached allowing extension of the tariff reductions to all WTO members. This is because average tariffs for the negotiating group are too low (1.5 percent). Extending the agenda to include Non-Tariff Barriers (NTBs) and Environmental Services (ESs) remains the acid test for an EGA to address meaningfully the climate change challenge. Reaching agreement on how to tackle NTBs and ESs will require delegating negotiating authority to ‘independent’ scientific experts and probably modifying WTO rules.

Aligning the trade and climate regimes will call for transformational changes in the WTO contract to take into account transnational externalities and public goods. This would amount to a shift from the present ‘negative contract’ where countries are free to choose their policies so long as they do not discriminate between domestic and imported goods to a ‘positive contract’ where WTO members have to pursue similar climate-friendly policies.

 

This paper draws and summarizes Melo and Solleder (2018b) that covers the broader role required of a successful EGA to mitigate climate change. The authors thank the French government for financial support under ANR-LABX-14-01.


de Melo J., Solleder J-M. (2018) Barriers to trade in environmental goods: How Important they are and what should developing countries expect from their removal, FERDI Working paper P235, September.

Abstract:

Few developing countries have participated in the environmental goods agreement (EGA) negotiations to reduce barriers on trade in Environmental Goods (EGs). Reasons for this reluctance are first reviewed along with a comprehensive description of barriers to trade (tariffs and NTBs) on two lists of EGs used in negotiations comprised mostly industrial products (The APEC and WTO lists), and a third, a list of Environmentally Preferable Products (EPPs) more representative of the perceived interests of developing countries. The paper then revisits and extends the literature on the estimation of barriers to trade in EGs for these lists. These estimates are carried out with a structural gravity model and new data: (i) on bilateral (rather than MFN) tariffs, and; (ii) with a measure of regulatory overlap in bilateral trade to capture the often-observed pattern of greater bilateral trade among countries that share similar regulatory regimes. Results show that tariffs generally reduce the intensity of bilateral trade, often with little difference in statistical significance between the EG and non-EG group for each list. Regulatory harmonization, as captured by an increase in regulatory overlap is also estimated to be conducive to more intense bilateral trade.


de Melo, J. & Solleder, J-M. (2017) NTMs and other Trade Measures for the Environment in ASEAN. FERDI working paper P206, décembre.

Abstract:

An open world trading system with low barriers to trade in Environmental Goods (EGs) and Environmental Services (ESs) accompanied by corrective SPS and TBT measures is necessary for the World Trading System to be compatible with the environmental objectives in the SDGs. So far, the political process and technical difficulties in defining EGs and ESs have plagued multilateral negotiations under the Doha Round and those under the Environmental Goods Agreement (EGA) resulting in lists of EGs and ESs with many weaknesses.

The chapter explores differences in policy measures across broad categories of EGs and ESs. Comparisons of EG and non-EG groups reveal that applied tariffs are lower for EGs for all countries and group of countries regardless of the selected EG list. On average, descriptive indices of NTMs are quite similar for EG and non-EG product lists revealing few robust differences between EGs and non-EGs and across countries. However, the regulatory distance is less among ASEAN membership than among EGA membership, suggesting more favourable prospects for fruitful negotiations in the ASEAN group. The paper closes with gravity-based panel estimates of bilateral trade. Two results stand out: on average, NTMs restrict bilateral trade by about 20 percent, but not differently for EGs than for non-EGs or for ASEAN countries as a group relative to other countries.  The chapter concludes with suggestions for reduction in tariffs for suitably defined EGs and more open regulatory measures for ESs.