Free Trade Agreements and Environment for Sustainable Development: A Gravity Model Analysis

Abstract

Free trade agreements (FTAs) have a key role in the global value chain. In the meantime, these are also disturbing the environmental balance of the world. The objective of this study is to check whether the trade is good or bad for the environments of countries that are bonded by trade agreements. This study examines the impact of FTAs on bilateral carbon emissions within the gravity framework. We find a positive impact of FTA agreements on bilateral CO2 pollution. However, in an income-based country group analysis, we find mixed evidence regarding FTAs. The analysis concerning high income countries indicates that free trade agreements are beneficial for high income countries, while, in the case of upper middle income and lower middle income countries, we find that the free trade agreements are not beneficial for their environments. These results of the effects of FTAs on bilateral CO2 pollution imply that low income countries have a greater pollution effect even after the implementation of an FTA due to lenient environmental standards. There is a need for developing countries to learn from high income countries, as their FTAs are beneficial for decreasing pollution.

China’s One Belt and One Road Initiative and Outward Chinese Foreign Direct Investment in Europe

“…For the poverty reduction and economic growth of a country, international trade can play an important role [25]. In contrast to the conventional approach of centralizing manufactured exports and emphasizing substitution impacts, Markusen (1995) claimed that global investment can expand imports of intermediaries from a home country, which further harmonizes its exports [26][27][28].…”

“…The main results showed the presence of complementarity between overseas investment and exports. Yao (2019) used the gravity model to assess free trade agreements, where the objective of the study was to check whether free trade agreements are good or bad for the environment of various countries [25]. Cheung and Qian (2009) evaluated the impacts of Chinese exports as factors of China's OFDI, and found that this relationship is positive [39].…”

Are Economic Distance and Geographic Remoteness Important in Sustainable Trade? Evidence from the Bilateral Trade between China and Kazakhstan

“…In this context, free trade agreements are a broad category of agreements under which participating countries agree to remove trade barriers. Studies have shown that such agreements increase employment and provide comparative advantages to partner countries, which in turn reduce the economic status gap (e.g., GDP, growth rate), that is, the so-called "economic distance," between two countries [1]. Thus, international bilateral trade encompasses a wide variety of sustainable economic and environmental impacts on the partner countries as well as on the rest of the world.…”

Drivers of Land Embodied in International Trade of Rice: The Italian Case Study

“…It's therefore necessary to look for a feasible way to prevent it, either acting on the i) reduction of the demand from importing countries that may be incentivized by tariffs (European Commission, 2016); ii) reduction of the impacts in exporting countries. In some cases, the latter might alleviate the high pressure on domestic resources and reduce conflicts for valuable scarce resources (Yao et al 2019). Our results have shown that the main driver of land embodied in trade of rice is the trade that is the amount of rice exported from Cambodia and Myanmar to Italy.…”