Changing Economic Openness for Environmental Policy Convergence: When Can Bilateral Trade Agreements Induce Convergence of Environmental Regulation?
International Studies Quarterly, Vol. 53, No. 4, pp. 931-953, 2009
37 Pages Posted: 13 Aug 2007 Last revised: 22 Aug 2011
Date Written: July 24, 2008
Citizens' concerns about (international) environmental protection standards are of increasing importance to governments in industrially advanced, high-regulating countries. In almost any proposal for a trade agreement, countries with low environmental regulation are required to introduce higher policy standards in exchange for high-regulating countries dismantling their trade barriers and granting access to their domestic markets. Low-regulating countries often act as required and introduce legislation aiming at reducing pollution. This leads to declaratory or de jure policy convergence. But not always is such legislative action associated with de facto or actual policy convergence, since policies are not always enforced. In order to analyze the strategic aspect of this potential "slippage", we set up a simple game-theoretic model with imperfect infomation. In the model, a high-regulating and a low-regulating country negotiate a bilateral free trade agreement with environmental provisions. We show how potential gains from trade, policy enforcement, and reputation costs, as well as domestic demands for environmental protection affect the occurrence of environmental policy convergence through conditional trade agreements. By that, this study advances our understanding of the relationship between bilateral trade and convergence of environmental policies.
Keywords: Trade agreements, policy convergence, regulation
JEL Classification: P16, F42, O13
Suggested Citation: Suggested Citation