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KDI 경제정보센터

ENG
  • Economic

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한국관련자료
Contingent Trade Agreements
NBER
2024.05.10
There are often conflicts between proponents of trade and environmental activists. This paper shows, however, how trade agreements can be designed so as to motivate environmental conservation. I first analyze a standard trade model, where resource exploitation (e.g., deforestation) is a trade-specific investment that causes environmental damage. In this model, traditional trade agreements will cause more exploitation. Next, I investigate the extent to which conservation can be motivated by a contingent trade agreement (CTA), where default tariffs can vary with changes in the resource stock (e.g., the forest cover). The model permits many products, countries, and collaborators. A numerical example suggests that growth and liberalization can cause Brazil‘s agricultural area to expand by 27%, but this expansion can be avoided if the EU and the US offer a CTA.