Greening up: the effects of environmental standards in EU and US trade agreements

ABSTRACT

Can environmental provisions in preferential trade agreements (PTAs) foster an environmental race to the top? The ways in which different enforcement mechanisms in North–South PTAs affect the implementation of environmental standards in developing countries are examined. It is argued that environmental provisions in European Union (EU) and United States (US) PTAs will be effective in instigating policy change in partner countries, although the timing of the effect will vary significantly. Fines and sanctions in US PTAs incentivize partner countries to reform during the negotiation process. Reform in EU PTA partners is predicted to occur during agreement implementation as a result of the EU’s policy dialogue approach. Illustrative evidence is provided and the hypotheses are tested using statistical estimations of EU and US PTAs with environmental provisions on developing countries’ environmental policy reform.

KEYWORDS:

• Preferential trade agreements
• conditionality
• civil society
• environmental standards
• North–South trade

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The new generation of EU PTAs treats environmental standards on par with trade issues due to their legally binding nature.

2. There is a bipartisan consensus on the inclusion of environmental standards that act as a side payment to the Democrats to ensure agreement ratification (Postnikov 2014).

3. Because all PTAs require states not to derogate from their existing levels of environmental protection for trade purposes, governments cannot simply lower environmental standards to make compliance easier in the future.

4. Because the EPI focuses on policy outcomes resulting from enacted policy changes, it provides a conservative test of our argument, as the change needs to occur in the previous period.

5. The online Appendix is available at https://www.researchgate.net/publication/316692360_Bastiaens_and_Postnikov%27s_Online_Appendix_for_Greening_Up_The_Effects_of_Environmental_Standards_in_EU_and_US_Trade_Agreements.

6. A negotiation period of 2 years also provides support for our hypotheses.

7. Models are robust when lagging the economic independent variables.

8. Please note that we later estimate a selection model to address endogeneity concerns.

9. Prakash and Potoski (2017) show that export dependence on the EU may lead countries to decrease their CO₂ emissions.

10. This Heckman selection model is robust to employing the scale operationalization of PTAs and controlling for alternative hypotheses, such as bilateral trade. Results are available upon request.

11. Buntaine and Parks’ (2013) measure of environmental NGOs has insufficient observations to estimate the regressions.