Environmental Regulation and foreign trade: an analysis for the CAN and MERCOSUR trade blocs in the period 2001-2019

ABSTRACT

This study examines the impact of trade and environmental agreements on trade in the Andean Community (CAN) and the Southern Common Market (MERCOSUR) during the period 2001–2019. Using a panel data methodology, the study analyses the effects of ratifying a number of agreements (the Paris Agreement, the Kyoto Protocol, the Nagoya Protocol, and Free Trade Agreements with the European Union) on total exports and imports. The results reveal that environmental regulations have a differentiated impact on the exports and imports of both trade blocs. These findings underscore the importance of trade and environmental agreements in promoting sustainable trade and emphasize the need for ongoing monitoring of their implementation to foster equitable and sustainable growth in the region.

KEYWORDS:

• Environmental regulation
• regional environmental agreements
• andean community
• MERCOSUR

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ According to the World Bank (2020) database, in 2020 the world emitted 46,120,921 kt of CO2 equivalent, while the LAC region emitted only 3,064,546.

² Pollution Haven Hypothesis: Countries open to international trade may adopt less stringent environmental regulations due to concerns about losing international competitiveness (De Santis, 2011, p. 2).

³ The partners countries are Argentina, Australia, Austria, Bolivia, Brazil, Canada, Chile, China, Colombia, Costa Rica, Denmark, Dominican Republic, Ecuador, El Salvador, France, Germany, Guatemala, Honduras, Hong Kong (China), India, Indonesia, Israel, Italy, Japan, South Korea, Malaysia, Mexico, Netherlands, New Zealand, Norway, Panama, Paraguay, Peru, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, United States of America and Uruguay.

⁴ UNFCCC (2021). Key aspects of the Paris Agreement. https://cop23.unfccc.int/most-requested/key-aspects-of-the-paris-agreement?_gl%3D1*jlre7*_ga*MTI5NjA5MzQwNC4xNjg2MDE1MzA4*_ga_7ZZWT14N79*MTY4NjAxNTMxMC4xLjEuMTY4NjAxNTQwOC4wLjAuMA&sa=D&source=docs&ust=1688262712147434&usg=AOvVaw1M-IKt0shkZrWQcTQPdaan.

⁵ UNTC. See Annex 2 for further information.

⁶ CEPAL (2011). The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity. https://observatoriop10.cepal.org/sites/default/files/documents/treaties/nagoya_protocol_sp.pdf.

⁷ UNTC. Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity.

⁸ UNFCC. What is the Kyoto Protocol? URL: https://unfccc.int/kyoto_protocol.

⁹ UNTC – UNTC. Amendment to Annex 2 of the Kyoto Protocol to the United Nations Framework Convention on Climate Change.

¹⁰ Multilateral environmental agreements: Montreal Protocol on Substances that Deplete the Ozone Layer, adopted on September 16, 1987; Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, adopted on March 22, 1989; Stockholm Convention on Persistent Organic Pollutants, adopted on May 22, 2001; Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), adopted on March 3, 1973; Convention on Biological Diversity (CBD) and its associated Cartagena Protocol on Biosafety, adopted on January 29, 2000; Kyoto Protocol of the UNFCCC, adopted on December 11, 1997; and Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, adopted on September 10, 1998. These multilateral environmental agreements encompass various protocols, amendments, annexes, and adjustments ratified by the Parties. From (p. 80): http://www.sice.oas.org/Trade/COL_PER_EU_FTA/COL_EU_Accord_s.pdf.

¹² See Marques & Spies (2006), Melitz (2005), Subramanian & Wei (2003), and Rose (2002).

Additional information

Notes on contributors

Alan Fairlie Reinoso

Alan Fairlie Full Professor in the Department of Economics. Director of the Master’s in Biocommerce and Sustainable Development (PUCP). Researcher at INTE and CISEPA. Former Dean of the Faculty of Social Sciences at Pontifical Catholic University of Peru during the period 2011-2016. Member of the Latin American Network on Trade Policy (LATN). Participant in CLACSO working groups: ‘Geopolitics, World System, and Regional Integration’ and ‘China and the World Power Map.’ Engaged in GRIDALE working groups: ‘Harmonization of Policies for Multidimensional Integration and Sustainable Development’ and ‘The Future of the European Union: Potentialities and Challenges.’ Former Andean Parliamentarian for the period 2016-2021 (former President of the Integration and Education Commission).

Tania Paredes Zegarra

Tania Paredes Zegarra Full-Teaching Assistant in the Department of Economics at Pontifical Catholic University of Peru (PUCP). Master’s and Bachelor’s degree in Economics from Pontifical Catholic University of Peru. Brings experience in the peruvian public sector (Ministry of Production, Andean Parliament, Ministry of Culture, Peruvian Radio and Television Institute and PROMPERU) and the academic sector (Osnabruck University and PUCP). Interests lie in the fields of econometrics, economic development, and applied microeconomics.

Paula Noelia Paredes Quintana

Paula Paredes Quintana Bachelor’s degree in Economics from Pontifical Catholic University of Peru. Brings experience in international cooperation, peruvian public sector, academia (Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Ministry of Agrarian Development and Irrigation, PUCP) and environmental funds (Profonanpe Peru, Green Climate Fund). Interests lie in the fields of public and private climate finance, climate resilient value chains, biotrade and waste management.