Strategic Environmental Policies when Waste Products are Tradable

The paper deals with international trade in hazardous waste products when there is an international oligopoly market for waste, and both waste‐importing and waste‐exporting countries act strategically to utilize national environmental policies to attach rents arising from trade in waste. The authors model a multiple‐stage game where waste is generated in an industrialized country as a byproduct of production, and potentially is exported to some less‐developed countries, if not abated locally, or imposed on local residents at a cost of an environmental tax. In the market for waste, an oligopolistic supply is assumed. The demand for waste is perfectly competitive, with waste‐processing firms guided by marginal disposal costs and environmental taxes levied by foreign countries. With each country playing Nash, the analysis finds domestic and foreign taxes to be distorted from the Pigouvian taxes in such a way that the domestic (waste‐exporter) tax rate is set below, and the foreign tax rate is set above, the Pigouvian taxes. However, a global welfare optimum requires tax distortions in the opposite direction, in the sense that foreign environmental taxes must be set below the Pigouvian tax rate.     

On the International Linkages between Trade and Merger Policies*

In a three‐country model, this paper investigates linkages between merger incentives of exporting firms and the trade policy of an importing country. When exporting firms come from only one country, the tariff response of the importing country reverses the welfare effects of a merger in the exporting country. If there exist two exporting countries, a merger creates two types of conflicting international externalities. First, a merger in one exporting country increases profits of all firms. Secondly, non‐merged firms lose if the importing country is free to raise its tariff in response to a merger of foreign exporters.     

Biofuel Subsidies and International Trade

This paper explores optimal biofuel subsidies in a general equilibrium trade model. The focus is on the production of biofuels such as corn‐based ethanol, which diverts corn from use as food. In the small‐country case, when the tax on crude is not available as a policy option, a second‐best biofuel subsidy may or may not be positive. In the large‐country case, the twin objectives of pollution reduction and terms‐of‐trade improvement justify a combination of crude tax and biofuel subsidy for the food exporter. Finally, we show that when both nations engage in biofuel policies, the terms‐of‐trade effects encourage the Nash equilibrium subsidy to be positive (negative) for the food exporting (importing) nation.     

Trade liberalization and trade performance of environmental goods: evidence from Asia-Pacific economic cooperation members

In this article, we study the impact of trade liberalization, including reductions in both tariff and nontariff trade barriers, on environmental goods (EGs) exports. Using bilateral trade data from 20 Asia-Pacific Economic Cooperation members, we find that tariff reduction in an exporting country has a larger positive impact on its exports of EGs than tariff reduction in an importing country. Our results also show that a lower nontariff barrier in an importing country increases its imports of EGs. A considerable amount of heterogeneity also exists in subsample results based on countries’ income levels.     

Endogenous Timing in a Strategic Trade Policy Game: A Two-Country Oligopoly Model with Multiple Firms

This paper examines strategic trade policy games where the number of firms in the importing and exporting countries differs and all firms play as Cournot oligopolies. Under the assumption of linear demand and constant marginal cost, we show that, if the number of firms in the exporting country exceeds that in the importing country by more than three, the government of the exporting country chooses to move as a leader, imposing an export tax on firms. The government of the importing country then becomes a follower and imposes an import tariff. This lies contrary to the previous study, which assumed that there is only one firm in each country.     

Optimal Pollution Standard in an Open Economy: Characterizing Environmental Diversity

The paper examines the optimal pollution standard for a large open economy. Using a two-country partial-equilibrium framework, the optimal standards are charaterized for autarky, free trade, and free trade together with cooperation among countries in setting standards. If pollution is local, at the free-trade equilibrium, the exporting country imposes a stricter standard than does the importing country. The ranking may be reversed if pollution is transnational. A surpriising implication is that if pollution is local, cooperation may imply a less stringent standard for both the exporting country and the importing country.     

Uniform Versus Discriminatory Tariffs

We analyze the non‐cooperative interaction between two exporting countries producing differentiated products and one importing country when governments use optimal policies to maximize welfare. The analysis includes product differentiation, asymmetric costs, and Bertrand competition. For identical exporting countries we demonstrate that the importing country always prefers a uniform tariff regime while both exporting countries prefer a discriminatory tariff regime for any degree of product differentiation. If countries are asymmetric in terms of production cost then the higher‐cost exporter always prefers the discriminatory regime but the lower‐cost exporter prefers the uniform regime if there is a significant cost differential. With cost asymmetry the announcement of a uniform tariff regime by the importer is not a credible strategy since there is an incentive to deviate to discrimination. This implies an international body can play a role in ensuring that tariff agreements are respected.     

Export cartel and consumer welfare

The purpose of this paper is to show that export cartels are not necessarily harmful for consumers in the importing countries. Using a strategic trade policy model, we show that, contrary to the harmful effect, product‐market cooperation benefits consumers by affecting the trade policies. We further show that consumers in the importing countries are affected adversely if cooperation is among the governments of the exporting countries, instead of the exporting firms.     

Between a Rock and a Hard Place: A Trade-Theory Analysis of Leakage Under Production- and Consumption-Based Policies

Without a comprehensive global climate agreement, carbon leakage remains a contentious issue. Consumption-based pricing of emissions—which could in practice be implemented with a full border tax adjustment (BTA)—has been forwarded as an option to increase the effectiveness of unilateral climate policy. This paper questions the economic rationale behind this approach, using a theoretical $2 \times 2$ trade model in which leakage occurs through terms-of-trade effects. We show analytically, first, that consumption-based pricing of emissions does not necessarily result in less leakage than production-based policies. Second, the sign of the optimal unilateral carbon tariff depends on the carbon-intensity differential between the foreign country’s exporting and non-exporting sectors, and not on the differential between home’s and foreign’s exporting sectors, as implied by the full BTA approach. Third, based on empirical data for the year 2004, our model implies that full BTA applied by the European Union on e.g. imports from and exports to China would—by shifting China’s production from the export sector with a relatively low carbon-intensity towards the more carbon-intensive non-export sector—actually increase leakage.     

“十二五”时期我国对外贸易的转变

"十二五"规划实施时期,国际国内的新形势对我国对外贸易提出了新的要求。为了实现协调和持续发展,对外贸易必须实现一系列的转变:由注重出口规模增长转向进出口并重;由以发达国家为主要贸易对象转向贸易对象的多元化;由以货物贸易为主转向货物贸易和服务贸易并重;由单一地打破贸易保护转变为通过多种方式减少贸易摩擦。     

A spatial equilibrium analysis of trade policy reforms on the world wheat market

Since a few countries produce most of the world's wheat, and consumption is widespread across the world, wheat is one of the most commonly traded agricultural commodities. In recent years, the wheat market has been going through difficult phases as wheat prices are depressed. The fall in wheat prices is attributed to a supply glut and restrictive trade barriers. This study develops a large-scale spatial equilibrium trade model for wheat to analyse the effects of removing trade barriers (tariffs and subsidies) on each country's/region's price, supply, demand, trade, welfare, and bilateral trade flows. The results show that trade liberalization leads to an increase (decrease) in prices in the exporting (importing) countries. Production and exports increase in the exporting country, and consumption and imports increase in the importing country. Consequently, the volume of trade also increases. The welfare of most countries rises, and thus, world welfare also rises.     

Endogenous Lobby Formation and Endogenous Environmental Protection with Unilateral Tariff Reduction

This paper studies how one country’s decision to liberalize trade affects the political economic structure that determines environmental policy in another country. By constructing a political economy model in which the formation of lobby groups and environmental policy are endogenously determined, we show that unilateral tariff reductions by a large country importing a polluting good will generate a lobby group with a relatively lower cost of organization in a small country exporting that good. A formulated lobby demands an inefficient environmental policy, and hence, the small country’s environmental regulations become less efficient. Then, we show that when a lobby already exists, unilateral tariff reductions result in the formation of a rival lobby and consequently make the small country’s environmental policy more efficient.     

考虑港口收费管制的进出口贸易竞争研究

考虑港口的收费管制因素,建立了进出口贸易竞争模型。该模型由一个出口国和两个进口国组成,且各国都拥有一个港口,位于出口国的两家公司均向两个进口国销售商品,并在各个进口国展开市场竞争（古诺竞争或伯川德竞争）,各贸易国的港口根据其是否存在价格管制确定港口收费。针对进出口公司的每种竞争模式,得到了不同的港口收费管制组合下各贸易国的港口收费、港口利润和社会福利,并将竞争均衡结果进行了比较。研究发现： （1）在进出口公司古诺竞争模式下,若三个贸易国的港口都无收费管制（有收费管制）且进出口产品的差异较大 （小）时,各贸易国的社会福利和港口利润均更高; （2）在进出口公司伯川德竞争模式下,若进出口产品的差异较大 （小）,则出口国的港口利润主要取决于港口收费 （贸易量）,而进口国恰好相反; （3）当进出口产品的差异较大 （小）时,进出口公司在古诺 （伯川德）竞争模式下各贸易国的社会福利、港口利润以及港口使用费都更高。     

Factor Taxation, Income Distribution and Capital Market Integration

This paper addresses the optimal mix of capital and wage taxation when policymakers maximize the political support of workers and capitalists, subject to a fixed revenue requirement. Capital market integration increases the efficiency costs of a tax on capital but simultaneously changes the political equilibrium through its effect on the distribution of factor incomes. These distributional effects are directly opposed in the capital importing and the capital exporting region. While the capital tax rate will always be lowered in the capital importing region, the tax rate in the exporting country will rise when political resistance to market-induced changes in the distribution of income is sufficiently high.     

Tax Competition in Vertically Differentiated Markets with Environmentally Conscious Consumers

This paper analyses the effects of tax competition on environmental product quality, pollution and welfare in a two-country, vertically differentiated, international duopoly, in which consumers are environmentally conscious. The firm in each country chooses first the environmental quality of its product (which reflects the emissions generated in the production process) and then the price. In equilibrium one country will be more polluted than the other because firms choose different levels of environmental quality of their products. We find that a country’s optimal commodity tax is higher if the domestic firm is the more polluting supplier. Furthermore, non-cooperative commodity tax rates are inefficiently high in equilibrium. This is because, in this framework with environmentally aware consumers, commodity taxes affect the choice of firms regarding their emissions. Therefore, a domestic tax reduction not only raises the profits of the foreign firm but also lowers its emission levels, resulting in higher welfare for the other country. We also analyse the optimal cooperative and non-cooperative commodity and emission taxes with border tax adjustments. With these two policy instruments available, commodity taxes are higher.     

Competing-destinations gravity model applied to trade in intermediate goods

The competing-destinations formulation of the gravity model ensues from the fact that unlike the classic version, this approach explicitly acknowledges the interdependence of the flows between a set of alternative countries. This article applies the competing-destinations gravity model to the analysis of trade in intermediate goods. The results of the model were then tested empirically with an international input–output data set and using the Poisson pseudo-maximum-likelihood estimator. The empirical results suggest that the analytical model can explain trade in intermediate goods. Indeed, as predicted, import of intermediate goods is increasing in the importing country’s demand for inputs, in the competitiveness of the exporting country, and decreasing in distance and competition posed by alternative countries.     

A Two‐Country Game of Competition Policies

Recently a number of studies have recognized that trade policy can be substituted for by competition policy. This study demonstrates, however, that there is a fundamental difference in the working of terms‐of‐trade effects between competition policy and tariff policy and that if countries optimally set their respective competition policies, it is unlikely to result in a tariff‐war‐like state in which all countries adopt distortionary policies. Instead, in a Nash equilibrium, one country maintains perfect competition in its domestic service sector while the other country tolerates imperfect competition.     

Location decisions of a polluting firm and the time consistency of environmental policy

This paper considers location decisions of a monopolist, who faces a tax on its emissions in the home country, under ex post that is, time consistent, and ex ante, that is precommitment, environmental policies. We show that the monopolist will relocate more often under ex post optimal emission taxes. A government which cannot commit to an ex ante emission tax and sets its tax ex post after abatement effort has been chosen, is unable to affect the monopolist’s location decision, because it cannot commit to strategically reduce its tax level in the first stage. Domestic welfare is often higher under ex post emission taxes whenever the monopolist relocates under both policy regimes. Otherwise, welfare is higher under government commitment to an ex ante emission tax level. Thus, government commitment to a policy is not always welfare improving.     

Strategic Distortion of the Objectives of Trade Policy

Abstract

By employing a simple three-country model in which there are two exporting countries and one consuming country, this paper analyses the consequences of one-country strategic distortion of the objectives of trade policy. It finds that although an exporting country can benefit from strategic distortion, it would be preferred that the importing country distorts its policy. Furthermore, it is found that preferential trading agreements can emerge endogenously.     

Taxing the Financially Integrated Multinational Firm

This paper develops a theoretical model of corporate taxation in the presence of financially integrated multinational firms. Under the assumption that multinational firms use some measure of internal loans to finance foreign investment, we find that the optimal corporate tax rate is positive from the perspective of a small, open economy. This finding contrasts the standard result that the optimal‐source‐based capital tax is zero. Intuitively, when multinational firms finance investment in one country with loans from affiliates in another country, the burden of the corporate taxes levied in the latter country partly falls on investment and thus workers in the former country. This tax exporting mechanism introduces a scope for corporate taxes, which is not present in standard models of international taxation. Accounting for the internal capital markets of multinational firms thus helps resolve the tension between standard theory predicting zero capital taxes and the casual observation that countries tend to employ corporate taxes at fairly high rates.