Table Of ContentImport Tariffs as Environmental Policy Instruments
Economy & Environment
VOLUME 19
Scientific Advisory Board
Scott Barrett, School ofA dvanced International Studies, fohns Hopkins University,
Washington DC, U.S.A.
Klaus Conrad, University of Mannheim, Mannheim, Germany
David James, Ecoservices Pty. Ltd., Whale Beach, New South Wales, Australia
Bengt J. Kristrom, University of Umea, Sweden
Raymond Prince, Congressional Budget Office, US. Congress, Washington DC, US.A.
Domenico Siniscalco, ENI-Enrico Mattei, Milano, Italy / University afTorino, Italy
The titles published in this series are listed at the end o/this volume.
Import Tariffs as Environmental
Policy Instruments
by
Christiane Kraus
The World Bank,
Washington DC, U.S.A.
and Hannover University,
Hannover, Germany
....
"
Springer-Science+Business Media, B.Y.
A C.LP. Catalogue record for this book is available from the Library of Congress.
ISBN 978-90-481-5461-6 ISBN 978-94-015-9614-5 (eBook)
DOI 10.1007/978-94-015-9614-5
Printed on acid-free paper
All Rights Reserved
© 2000 Springer Science+Business Media Dordrecht
Originally published by Kluwer Academic Publishers in 2000.
Softcover reprint of the hardcover 1st edition 2000
No part of the material protected by this copyright notice may be reproduced or
utilized in any form or by any means, electronic or mechanical,
including photocopying, recording or by any information storage and
retrieval system, without written permission from the copyright owner.
Import Tariffs as Environmental Policy Instruments
ABSTRACT
This study presents an integrated theoretical and political approach to
assess import tariffs to support environmental policy instruments.
To analyse rigorously the theoretical claim for such eco-tariffs, we
provide a unified framework in form of an international trade model
enriched by a domestic respectively global environmental externality. In the
course of the investigation, we modify the model to analyse an array of
contexts for which an environmental quality or welfare improving effect of
eco-tariffs has been claimed. We characterise circumstances and conditions
under which such tariffs can be shown to improve environmental quality and
social welfare, taking into account general equilibrium effects.
Furthermore, we apply the theoretical results in a policy analysis of eco
tariffs and other trade instruments in the context of domestic and global
environmental policy to assess the relevance of the theoretically analysed
eco-tariffs.
Finally, we present the GATT/WTO rules and regulations which to date
ban use of eco-tariffs for environmental objectives. Mapping those rules and
regulations against our theoretical results, we attempt to isolate which rules
ought to be changed.
v
VI
ACKNOWLEDGEMENTS
This book is the result of more than three years of research that began in
Brussels, continued in Kiel, was mainly undertaken in Hannover, and
concluded in Washington, DC.
I first started thinking about the suitability of trade instruments to further
environmental protection while working in 1995 for DG I at the European
Commission where my Conseiller Ramiro Cibrian brought this question to
my attention. Thereafter I began my doctoral studies at Kiel University
where Prof. Dr. Michael Rauscher took an interest in my work. Prof.
Rauscher subsequently agreed to co-supervise my doctoral thesis when I
moved in 1996 to Hannover University to continue - and eventually finish -
my doctoral studies in the department for Quantitative Economic Research
under the supervision of Prof. Dr. Hans-Joachim Heinemann, chair for
International Economics.
I am highly indebted to both Prof. Heinemann and Prof. Rauscher for their
continued support over the course of this my doctoral studies. Prof.
Heinemann provided excellent working conditions at Hannover University.
He also sharpened my mind on issues of international monetary and trade
economics, and challenged my views on various issues of this study.
Prof. Rauscher, chair for International Economics at Rostock university,
encouraged and guided me in a truly marvellous fashion. Without his expert
knowledge in the field and outstanding qualities as a supervisor I would not
have mastered the challenge of a doctoral thesis.
Support by the Studienstiftung des deutschen Volkes is gratefully
acknowledged.
My friends at Hannover University - Lars, Nelli, Boris, Karen, Adrian
and Dirk formed a wonderful team. Special thanks go to Dirk for helping me
with a lot of tricky analytical questions and reading the entire manuscript,
and to Adrian for formatting the graphs.
I would also like to thank Martin for long discussions on GATT law
issues, and Sophia and Stefan for their flexibility to tum a social visit into an
intense last-minute proof-reading effort. Special thanks go to my mentoress
Lilo who always had a supportive and watchful eye on me from Brussels.
Finally, I would like to thank Jane for her invaluable editorial support.
I am deeply grateful to my friends Barbara, lise, Lilja, Marietta, Sophie
and Philipp for providing the emotional backbone to live through the ups and
downs of doctoral studies.
My greatest debt is to my parents who carried much of the burden and
shared my joy in completing this book - lowe them so much more than my
doctorate.
WERWEISS?
Ein Mensch schreibt feurig ein Gedicht:
So, wies ihm vorschwebt, wird es nicht.
Vielleicht hat Gatt sich auch die Welt
Beim Schopfen schaner vorgestellt.
(Roth [1983,265])
TABLE OF CONTENTS
Page
Abstract ............................................................................... v
Acknowledgements ................................................................. vi
List ofA bbreviations ......................................... , ......... '" ........x iii
List ofS ymbols .....................................................................x iv
List ofF igures .................................................. , " ................. xv
List of Tables ..................................................................... xvii
CHAPTER 1. INTRODUCTORY REMARKS ............................. 1
1.1 SUBJECT , MOTIVATION, OBJECTIVE, ApPROACH AND STRUCTURE .. 1
1.2 ISSUES, CONCEPTS AND DEFINITIONS ..................................... 5
CHAPTER 2. ECO-TARIFFS TO AVOID ECO-DUMPING AND
ENVIRONMENTAL RACES TOWARDS
THE BOTTOM (ERTB} ..................................... 17
2.1 EMPIRICAL ASSESSMENT OF ECO-DUMPING AND ERTB ............. 17
2.2 THEORETICAL ASSESSMENT OF ECO-DUMPING AND ERTB .......... 19
2.3 ECO-TARIFFS TO COUNTERACT ECO-DUMPING AND ERTB? ........ 26
2.4 SUMMARY AND CONCLUSIONS ........................................... 29
CHAPTER 3. AN INTERNATIONAL TRADE MODEL WITH
POLLUTION AND ECO-TARIFFS .....................3 1
3.1 MODEL .......................................................................3 1
3.2 EFFECTS OF TRADE LIBERALISATION AND TRADE POLiCy .......... 40
3.3 EFFECT OF NON-OPTIMAL ENVIRONMENTAL AND TRADE POLICY .. 44
3.4 CONCLUSIONS ...............................................................4 6
CHAPTER 4. TARIFFS TO AVOID ECO-DUMPING FOR TERMS
OF TRADE REASONS ......................................4 7
4.1 ECO-DUMPING AND TERMS OF TRADE IMPROVEMENTS .............. .48
4.2 ECO-TARIFFS AND TERMS OF TRADE IMPROVEMENTS ................ 63
4.3 COMPARISON OF ECO-DUMPING AND ECO-TARIFFS FOR TERMS
OF TRADE REASONS ........................................................ 71
4.4 CONCLUSIONS .............................................................. 76
CHAPTER 5. TARIFFS TO AVOID ECO-DUMPING FOR
STRATEGIC TRADE POLICY REASONS ............7 7
5.1 STRATEGIC ENVIRONMENTAL POLICY .................................. 78
5.2 STRATEGIC ENVIRONMENTAL AND TRADE POLICY .................... 90
x
5.3 DISCUSSION ................................................................. 93
5.4 CONCLUSIONS ...............................................................9 5
CHAPTER 6. TARIFFS TO COUNTERACT ECO-DUMPING
CAUSED BY REGULATORY CAPTURE .............9 7
6.1 ENVIRONMENTAL REGULATION UNDER REGULATORY CAPTURE ... 98
6.2 Eco-TARIFFS AND REGULATORY CAPTURE .......................... .1 04
6.2.1 Eco-tariffs and Regulatory Capture in a Small Country ........ 10 4
6.2.2 Eco-tariffs and Regulatory Capture in a Large Country ......... 10 9
6.3 DISCUSSION AND EXTENSION ........................................... 114
6.3.1 Regulatory Capture, Environmental and Trade Policy .......... 114
6.3.2 Conditional Eco-tariffs and Regulatory Capture ................. 117
6.4 CONCLUSIONS ............................................................ 118
CHAPTER 7. THE ROLE OF TARIFFS IN PROTECTING
GLOBAL ENVIRONMENTAL COMMONS ........ 121
7.1 GLOBAL COOPERATION AND LEAKAGE EFFECT ..................... 122
7.2 TRADE INSTRUMENTS AS SECOND BEST MEASURES ................ 124
7.3 TRADE INSTRUMENTS TO ACHIEVE GLOBAL COOPERATION ....... 128
7.4 DISCUSSION AND OPEN ISSUES .......................................... 131
7.5 SUMMARY AND CONCLUSIONS .......................................... 133
CHAPTER 8. AN INTERNATIONAL TRADE MODEL WITH
SPILL-OVER POLLUTION .............................. 135
8.1 SPILL-OVER POLLUTION ................................................ 135
8.2 ENVIRONMENTAL POLICY IN THE PRESENCE OF SPILL-OVER
POLLUTION ................................................................. 136
8.3 CONCLUSIONS ............................................................. 147
CHAPTER 9. TARIFFS AS SECOND BEST INSTRUMENTS TO
INTERNALISE SPILL-OVER POLLUTION. ........ 149
9.1 Eco-TARIFFS IN THE PRESENCE OF SPILL-OVER POLLUTION ...... 149
9.2 WELFARE EFFECTS OF ECO-TARIFFS FOR THE REST OF THE
WORLD IN THE PRESENCE OF SPILL-OVER POLLUTION ............. 159
9.3 GLOBAL WELFARE EFFECTS OF ECO-TARIFFS IN THE PRESENCE
OF SPILL-OVER POLLUTON .............................................. 162
9.4 CONCLUSIONS ............................................................. 163
CHAPTER 10. INCENTIVE EFFECTS OF ECO-TARIFFS ......... 165
10.1 ENVIRONMENTAL POLICY EFFECTS OF AN ECO-TARIFF ............ 165
10.2 INCENTIVE EFFECTS OF A CONDITIONAL Eco-TARIFF .............. 169
10.3 DISCUSSION AND EXTENSION .......................................... 172
10.4 CONCLUSIONS ............................................................. 174
