The Effectiveness of Environmental Provisions in Regional Trade Agreements

Abstract

Abstract Trade liberalization can spur environmental degradation. Concerns over these adverse impacts have led to a debate over the need for environmental provisions in regional trade agreements (RTAs); however, the effectiveness of such provisions is unknown. In this paper, we provide new plausibly causal evidence that environmental provisions are effective in limiting deforestation following the entry into force of RTAs. We exploit high resolution, satellite-derived estimates of deforestation, and identify the content of RTAs using a new dataset with detailed information on individual provisions. Accounting for the potential endogeneity of environmental provisions in RTAs, we find that the inclusion of specific provisions aimed at protecting forests and/or biodiversity almost entirely offsets the net increases in forest loss observed in similar RTAs without such provisions. The effects are particularly strong in tropical, developing countries with greater biodiversity. The inclusion of these provisions limits agricultural expansion and agricultural trade.