Research

Peer Reviewed Publications

How trade policy can support the climate agenda , 2022, Science,
with Jakob, M., Afionis, S., Ahman, M., Antoci, A., Arens, M., Ascensao, F., van Asselt, H., Baumert, N., Borghesi, S., Brunel, C., Caron, J., Cosbey, A., Droege, S., Evans, A., Iannucci, G., Jiborn, M., Kander, A., Kulionis, V., Levinson, A., de Melo, J., Moerenhout, T., Monti, A., Panezi, M., Quirion, P., Sager, L., Sakai, M., Sesmero, J., Sodini, M., Verkuijl, C., Vogl, V., Wenz, L., and Willner, S.

Abstract:

Economic analysis has produced ample insights on how international trade and climate policy interact. Trade presents both opportunities and obstacles, and invites the question of how domestic climate policies can be effective in a global economy integrated through international trade. Particularly problematic is the potential relocation of production to regions with low climate standards. Measures to level the playing field, such as border carbon adjustments (BCAs), may be justified for specific emissions-intensive and trade-exposed sectors but need to be well-targeted, carefully navigating tensions that can arise between the desire to respect global trade rules and the need to elaborate and implement effective national climate policies. The conformity of specific trade measures with international trade and climate change law is not entirely clear. Yet, clarity is needed to ensure that the industry actors affected will find the rules predictable and be able to adhere to them.

https://doi.org/10.1126/science.abo4207

Market power and export taxes, 2020, European Economic Review

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.

Keywords: Market power; Export taxes; Export policy; Import demand elasticities

https://doi.org/10.1016/j.euroecorev.2020.103425

Barriers to trade in environmental goods: How important they are and what should developing countries expect from their removal, 2020, World Development,

with Jaime de Melo

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: the APEC list comprising mostly industrial products representative of high-income countries that served as point of departure on the negotiations for an Environmental Goods Agreement (EGA) and 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 with: (i) new data on bilateral (rather than MFN) tariffs, and a new classification of NTBs; (ii) a measure of regulatory overlap in bilateral trade. Results show that tariffs reduce the intensity of bilateral trade. Regulatory harmonization, as captured by an increase in regulatory overlap is also estimated to be conducive to more intense bilateral trade.

Keywords: Environmental goods, WTO, Trade and environment


https://doi.org/10.1016/j.worlddev.2020.104910


Related Vox Column : https://voxeu.org/article/what-s-wrong-wto-s-environmental-goods-agreement


The EGA Negotiations: Why They Are Important, Why They Are Stalled, and Challenges Ahead, 2020, Journal of World Trade,
with Jaime de Melo

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, fourteen 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. This article documents this episode and the mercantilistic behaviour of negotiators that prevented agreement on an extended list of EGs, a prerequisite for 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%). 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.

Keywords: Environmental goods, Environmental services, EGA, WTO, trade and environment, tariffs, NTBs

https://kluwerlawonline.com/journalarticle/Journal+of+World+Trade/54.3/TRAD2020015

Swiss Market in a global Trade War, 2019, Aussenwirtschaft,
with Alessandro Nicita, Marcelo Olarreaga, & Peri da Silva

Abstract:

We measure the extent to which Swiss market access would be affected in a global trade war. After calculating the change in tariffs at the tariff-line level that Swiss exporters would face in a trade war, we then aggregate them at the industry, destination market, and global level using theoretically well-grounded aggregation methods first introduced by Anderson and Neary (1996). Our results suggest that Swiss market access will be seriously jeopardized in the event of a global trade war, with an increase in tariffs faced by Swiss exporters of 34 percentage points. The largest increases in tariffs would be experienced in large destination markets where Swiss exporters currently benefit from low export barriers (the European Union, the United States and Japan). Chemicals, machinery, professional and scientific equipment, and food experience above average increases in tariff barriers.

Related column in French and German on https://dievolkswirtschaft.ch/fr/2020/04/nicita-olarreaga-silva-solleder-04-2020fr/

Book Chapters

Towards an Environmental Goods Agreement Style (EGAST) agenda to improve the regime complex for climate change, 2022, in Handbook on Trade Policy and Climate Change edited by Michael Jakob;
with Jaime de Melo

Abstract:

Ever since the creation of the WTO, attempts at bringing together the trade and climate regime have failed. This paper argues that a successful EGA-STyle (EGAST) agenda should go beyond the elimination of ‘nuisance tariffs’ to include high energy-efficiency EGs and high-tariff products. The EG list should also include Environmentally Preferable Products. As to the difficult-to-detect Non-tariff Barriers (e.g., non-tariff measures), among which some are protectionist in intent, they should be included in the agenda up for mutual recognition. The paper concludes that negotiations to reduce barriers to trade in EGs would be a promising avenue for rapprochement between the trade and climate regimes.

Keywords: Environmental Goods; WTO; Climate Change; EGA;

https://www.e-elgar.com/shop/usd/handbook-on-trade-policy-and-climate-change-9781839103230.html

NTMs and other Trade Measures for the Environment in ASEAN, 2019 in Regional Integration and Non-Tariff Measures in ASEAN edited by Lili Yan Ing, Ralf Peters, and Olivier Cadot; Jakarta: Economic Research Institute for ASEAN and East Asia;
with Jaime de Melo

Integration along the Abuja road map: A progress report, 2018, in Industries without Smokestacks edited by Richard Newfarmer, John Page, and Finn Tarp; Oxford University Press;
with Jaime de Melo & Mariem Nouar

Book and corresponding working papers are available in open-access :

https://www.wider.unu.edu/publication/industries-without-smokestacks-2

Working Papers (selected)

For a complete list, please refer to my ResearchGate profile.

The Landscape of CO2 emissions Across Africa: A Comparative Perspective, CEPR Discussion Paper No. 17450. with Jaime de Melo

Abstract:

Expansion of Global Value Chains (GVCs) is a mixed blessing for the environment. Effects of growth and emissions from transport associated with international trade have negative effects; but greater flows of knowledge and associated spillovers, and adoption of environmentally innovative products have positive effects. This paper provides evidence on carbon dioxide (CO2) emissions for 51 African and 132 other countries for 163 products over the period 1995‒2015. The resulting landscape is summarized in four patterns. Patterns identified for the Africa region differ from those identified for other regions but are closely related to a synthetic aggregate comparator constructed on the basis of three characteristics (per capita income, share of manufacturing in GDP, and distance to trading partners).

1: All regions have reduced emission intensities over the period 1995‒2015. Africa's share of global CO2 emissions has remained constant over the period 1995‒2015. Asia, already the region with the largest share of global emission in 1995, has strengthened its leading polluter position. Europe and the Americas have reduced their share of emissions by nine and eight percentage points, respectively. Asia is decarbonizing; Africa not yet.

2: Carbon intensity of production has increased in Africa in both decades, though much less so over the period 2005‒2015 when, on average, emissions grew less rapidly than population. Over half of the 20 African top emitting countries shifted towards more carbon-intensive techniques.

3: Source of regional total emissions: Over the period 1995‒2015, intra-regional shares of emissions fell by seven, ten, and two percentage points to 84%, 75%, and 88% for Africa, Europe, and Asia, respectively. Africa's share of emissions originating from Asia rose from 4% to 11%. Europe's share of emissions originating from Africa and Asia rose from 2% and 8% to 4% and 16%, respectively

4: The export basket of Africa is skewed towards high CO2e intensity products. CO2 emission intensities are positively correlated with both the output upstreamness (OU) and input downstreamness (ID). The OU/ID indicator of position in a supply chain is negatively correlated with CO2 emission intensities within regions. The fit is higher at the sectoral level. For manufactures, being more upstream by 1% is associated with a higher emissions intensity of 0.61%. For the other sectors, the relation is negative, and largest for Agriculture and Construction.

Link to the CEPR WP or to the AERC WP.

Related VOX column : Africa’s contribution to world CO2 emissions | CEPR

Patterns and Correlates of Supply Chain Trade in MENA and SSA, 2022, Ferdi Working paper n°P304. with Jaime de Melo

Abstract:

Strong participation in Global Supply Chains (GSCs) (aka Global Value Chains (GVCs)) is an indication of the structural transformation at the heart of the ‘Africa we want’ described in African Union’s Agenda 2063 project. We discuss challenges at measuring GSCs and report new input- output based measures (upstreamness and downstreamness of exports) at several levels: across countries, regions, and sectors over the period 1995-2015. We also report participation measures based on firm-level data and new estimates of factors affecting participation of sectors in GVCs over the period 1995-2015. On average, for both Africa and MENA, exports have a low content of imported intermediates and exports undergo further transformation in destination countries before reaching consumers. Compared with other regions, both Africa and MENA mostly engage in supply chain trade with countries outside their respective region. Firm-level estimates for several countries show that African firms are scarcely engaged in supply chain trade. In sum, in spite of regional trade agreements focussing on reducing trade barriers to intra-regional trade, regional value chains have failed to develop in both regions.

Countries with high growth rates in services also display high growth rates in goods. Africa has not participated in the explosive growth in services (a factor of 10 between 1980 and 2014). In spite of some catching up over 2000-14, the gap of trade in services with other regions has widened. GVC participation rates in services (high and low-tech) in Africa and MENA have not increased between 1995 and 2015. The slow growth of participation in GVCs could then reflect slow growth in trade in services and low levels of GVC participation in services sectors. High trade costs hamper bilateral trade. Gravity-based estimates show that average bilateral trade costs for SSA countries were over twice (close to twice for MENA countries) those of the 15 largest importers in 1995 with a catch up rate of 21 percentage points by 2015 for MENA (about twice the SSA catch up rate). Assume that bilateral GVC participation depends on bilateral costs which in turn depend on indicators of hard (national data infrastructure like telecoms) and soft infrastructure (like regulatory policies). Then, the intensity of GVC is positively associated with telecom subscriptions with a direct elasticity of 0.4 and an indirect effect through a reduction in trade costs of 0.25.

Link to the WP.


Market Integration Across Africa: Progress and Challenges Ahead, 2020, AfDB Working paper n°342. with Jaime de Melo and Zakaria Sorgho

Abstract:

Treaties implemented by Regional Organizations (ROs) among which the eight Regional Economic Communities (RECs) have piloted integration across the African continent. The recently created Africa Continental Free Trade Area (AfCFTA), effective since May 2019, is the latest effort along the roadmap started with the Abuja Treaty of 1994 and continued with the launch of ‘Agenda 2063’ on the 50th anniversary of the OAU. This survey has two objectives: take stock of progress at market integration and understand the causes of the African ‘proximity gap’. The review singles out two areas for reducing intra-regional trade costs: adopting simple rules of origin, i.e. rules that are business friendly rather than business owned (details in annex A3) and ‘taking seriously’ the Trade Facilitation Agreement (TFA). New estimates suggest that if the average time in customs for imports at the African Union level were to be reduced to the average time for exports, that is reduced by 49 hours, this would be equivalent to a reduction of 2.7% on tariffs in importing countries.The greatest challenge ahead is increasing the provision of Regional Public Goods (RPGs). These are under-provided across the continent. Because this survey is mostly about economic integration, we only coverevidence of RPGs in two areas: peace and security and cross-border infrastructure. For both, the evidence suggests that provision of these RPGs has been low. Greater provision would be conducive, if not essential, to the success of African regional integration.

https://www.afdb.org/en/documents/working-paper-342-market-integration-across-africaprogress-and-challenges-ahead