Technical measures, environmental protection, and trade

Abstract

Technical regulations are numerous, growing, and less transparent than price measures. Frequently used for Non-trade Policy Objectives (NTPOs), the technical regulations are adopted also for environmental protection. The trade effects of environmental measures are underinvestigated. Relying on a unique and original dataset of technical measures notified for environmental reasons, we show how they hinder bilateral trade flows, and tend to favour trade flows of countries with solid economic and political influence, such as high-income and G20 economies. Regardless of the environmental impacts of the technical regulations, beyond the scope of our investigation, the measures shape trade in favour of the wealthiest and most industrialised countries which have better financial and technical endowments to comply with environmentally friendly requirements. Far from suggesting which mechanism drives the discriminatory nature, we argue that the rapid raise of new regulations for the environmental protection may exacerbate existing divide.