The impact of trade liberalization of environmental products on welfare, trade, and the environment in Argentina María Priscila Ramos Mentor: AlessandroNicita Policymaker: Sec. Julia Hoppstock (Cancillería Argentina) Vi seminar on trade and poverty, Geneva, 8-10 September 2014
1. Motivation EGS trade liberalization negotiations • Triple win objective for development, trade and the environment. • Main questions under discussion: EGS definition • Approaches: The list approach vs. other approaches • Trade liberalization modalities: SDT for developing countries? • Why are these negotiations important to Argentina?
1. Motivation (cont.)Potentialincrease in EGS Argentina’strade Export Pattern of EGS for Argentina Concentration of Argentina’s EGS trade Source: MAcMap-HS6 database, CEPII.
1. Motivation (cont.) Protectionpatterns of EGS Source: MAcMap-HS6 database, CEPII.
1. Objective (cont.) 1) To evaluate the effects of the elimination of multilateral bound tariffs according to • each four EGS lists (APEC, Japan, OECD, UNCTAD-EPP) on Argentina: • trade, • welfare and its distribution across urban households and • the environment (CO2 emissions) 2) To provide policy recommendation to identify EGS and modalities that would improve gains for Argentina and other developing countries How do we address these questions?
2. Two-stepmethodology • AggregateWelfare • Trade (total, bilateral and by sector) • CO2emissions GTAP 7.1 MAcMap-HS-6 (15r, 39s) Tables of correspondences • Welfare (consumption and wageeffects) • Distribution of real incomechanges ENGH 1996-1997 (7g)
2. Two-stepmethodology (cont.) Simulated EGS Scenarios Multilateral boundtariffeliminationon EGS according to: • Thelistapproachwith 4 alternativelists: • OECD • APEC, • Japan, • UNCTAD-EPPs • Undertwodifferenttariffphase-outmodalities: • Without SDT provisionsfordevelopingcountries • Withdeferredtariffreductionsby 5 yearsfordevelopingcountries (SDT)
3. Findings A) TradeResults Argentina’strade in per cent changecompared to thebaseline (2030) AL L TRADE UNCTADTOT BUT bilateral trade and sectoral trade differs across the EGS lists
3. Findings (cont.)Changes in theArgentina’strade at theregion and sector levels TheJapanlist The UNCTAD-EPP list Increasewithotherdevelopingcountries (e.g. India, 1.4% M and 14.2% X). Export concentration: increase only in Clothing and Food & Beverages. Importdiversificaction: increaseacrosssectorsintensifyingcompetitionfor local producers. • IncreaseswithJapan(19.73% M and 7% X) and otherlesstraditionalpartners, and • fallswithBrazil(-8% M and X). • Exportdiversification:increaseacrosssectors. • Importsfallin allsectorsexceptTransport, Communication and Housing (5.5%) beingthemostaffectedbycompetition.
3. Findings (cont.) B) Welfareresults Argentina’swelfare per cent changecompared to thebaseline (2030) TOT UNCTAD EPP All.Eff. and I JAPAN TOT APEC and OECD
3. Findings(cont.)Distribution of householdwelfare (a) Wage welfare effect (b) Consumption welfare effect Small priceschanges and smallconsumptioneffects Greaterwageeffect = Japan Fairerwageeffect = UNCTAD-EPP
Argentina CO2 emissions only reduce under the OECD and the UNCTAD-EPP lists • Global CO2emissionsincreaseunderallscenarios 3. Findings(cont.) C) Environmentalresults
4. Policyrecommendations • None of the four lists leads to a global triple-win situation. • To Argentina: • If the list approach is retained, How could another EGS proposal enhance the Argentina triple-win situation?
4. Policyrecommendations(cont.) SDT provisions for developing countries Non-list approaches suggest: • To differentiate EGS lists across WTO members • Ranking EGS based on common trade, development and environmental criteria • To allow for more flexibility in EGS market access • Lower cuts and/or longer phase out period -> Only slight improvement to Argentina under the Japan list • To assess other modalities for EGS tariff cuts (e.g. TRQs) • To provide technological and financial transfers to facilitate adoption of environmental-friendly technologies and practices
5. Final Remarks Main conclusions of this work • Preferred scenarios to Argentina: The UNCTAD-EPP and the Japanese lists BUT • with quantitative and composition differences between them. • Potential three-fold gains lie in the details: • EGS coverage, trade liberalization modalities and the treatment of countries differences. • Greater gains to Argentina and other developing countries are subject to the implementation of SDT provisions.
5. Final Remarks(cont.) Methodological limitations of this work • Data: Imperfect correspondence and aggregation • Modeling assumptions: • No extensive margin of trade • Full employment of resources • CO2 emissions caused exclusively by fuel energy consumption How can weimproveproposals to be close to a triple winsituation? • To identify of common (trade, development and environmental) criteria to define the Argentina’s EGS list • To evaluate different EGS trade liberalization modalities • To provide financial aids and technological transfers to countries with lower level of development
Thankforyourattention Comments and questions are welcome!