Trade liberalization, consumption shifting and pollution: Evidence from Mexico's used vehicle imports

Abstract

This paper develops a model of used vehicle trade between the United States and Mexico, countries with different environmental regulations regarding vehicle emissions. We demonstrate that the United States, with its strict environmental regulations, has a motive to export used vehicles to Mexico, which impacts air pollution emissions from vehicle driving in Mexico. Using unique data on the import and registration of vehicles in Mexico after NAFTA, we find that Mexico's used vehicle imports reduce pollution emissions generated from vehicle driving mainly because of the technique effect, that is, model–age‐comparable vehicles imported from the United States emit less than those originally operated in Mexico.

Trade in Secondhand Goods and Recyclable Materials, Monitoring of Illegal Trade, and Import Quotas on Legal Trade

“…First, we excluded the change in the international (exporting) price of illegal exports by assuming a constant marginal cost of illegal exports. However, Chen et al (2019) demonstrated that strict monitoring policies decrease not only illegal trade but also the import price of materials. It is interesting to generalize the present model and consider the upward sloping of the marginal cost curve of illegal exports.…”

“…In such a case, because they will be recycled in the future, even if technology and environmental management may progress, they may increase environmental damage. For example, Chen et al (2019) examined the effect of Mexico's imports of secondhand vehicles from the US on total emission. They disaggregate the effect into scale, composition, and technique effects, and demonstrate that used vehicle imports decrease total emission: that is, the technique effect, arising from the replacement of originally used vehicles with more environmentally friendly imported secondhand vehicles, dominates the other two effects that increase pollution emission.…”

“…The last remark in Proposition 1 implies that, if the use of secondhand goods replaces the consumption of environmentally unfriendly new goods in the foreign country, an increase in the monitoring probability may deteriorate the foreign environment by discouraging this replacement. As described in Subsection 2.5, in the case of Mexico's used vehicles imports demonstrated by Chen et al (2019), this condition is considered to hold. Proposition 1 also provides an important policy implication.…”

Research Advances and Insights on Trade Liberalisation Based on CiteSpace Analysis

“…Keywords are a high level summary of the topic of the article, and their frequency, relevance and prominence can reveal the research hotspots, internal links and importance of the field. Keyword analysis can visually present the knowledge structure of the research field and explore hot issues, thematic directions and research trends [3].…”