Free Trade Today by Jagdish Bhagwati Princeton University Press, Princeton and Oxford, 2002, pp. 121. Free Trade under Fire by Douglas A. Irwin Princeton University Press, Princeton and Oxford, 2002, pp. 253.
Free Trade Today by Jagdish Bhagwati and Free Trade under Fire by Douglas A. Irwin . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bijit Bora The Role of the World Trade Organization in Global Governance by Gary P. Sampson . . . . . . . . . . . . . . . . . . . . . . . . . . Miles Kahler The Political Economy of Environmental Protectionism by Achim Körber . . . . . . . . . . . . . . . . . . . . . . . . . Axel Michaelowa
Border Carbon Adjustments and Unilateral Incentives to Regulate the Climate
It is suggested that trade measures should be used to induce exporters to adopt more ambitious climate policy and reduce global emissions. However, a tariff and the exporter's emission tax are likely substitutes, which would undermine the rationale for these trade measures. This paper examines incentives to regulate the climate under border carbon adjustment (BCA), defined as an import duty of a magnitude determined by the difference in emission taxes between trade partners. Unlike a tariff, a BCA can induce the exporter to adopt a higher tax, suggesting that the BCA and tariff are not equally effective at targeting global emission levels and that the features of the border measure matter in assessing the effectiveness of trade policy in targeting global emissions.
The Value of MFN Treatment
We discuss most favoured nation (MFN) treatment in trade agreements, suggesting that its value to individual countries depends critically on the relevant model solution concept used to evaluate it. We analyze both rights to MFN treatment in foreign markets, and the obligation to grant MFN treatment in home markets; the heart of the post-war GATT/WTO multilateral trading system. In a traditional competitive equilibrium framework, MFN gives benefits to small countries in being able to free ride on bilateral tariff concessions exchanged between larger countries in GATT/WTO negotiating rounds. In a non-cooperative Nash equilibrium framework, MFN restrains retaliatory actions to be non-discriminatory. In a co-operative bargaining framework in which trade policies are jointly set, MFN changes the threat point and hence affects the bargaining solution. We use a calibrated numerical model of global trade in which we compute all three solution concepts and compare MFN and non MFN equilibria for each. We use the GTAP (1992) data base, concluding that quantitatively the most significant effect of MFN seems to be in its impact on bargaining rather than on competitive and Nash equilibrium solutions; being beneficial to smaller countries.