Das, DeLoach publish paper on trade and the environment

Economics professors Tina Das and Steve DeLoach recently published the paper, “Strategic environmental policy with technology licensing,” in the International Trade Journal.The paper investigates one of the reasons why bilateral agreements that attempt to link environmental protection with open trade are difficult to sustain.

Inherently, the problem is one of inequalities in technology. If poorer countries try to protect the environment like their wealthier trading partners, they will not be able to compete since pollution abatement is relatively expensive to them. While some have proposed that rich countries simple “give away” their superior pollution abatement technology, such suggestions are impractical. The reason is that these technologies are typically privately patented.

However, patent holders would be willing to sell the licensing rights.Das and DeLoach examine the problem using game theory. They find that such agreements can work if licensing of pollution abatement technologies is incorporated into the agreement, but only under certain conditions. Ironically, the better the technology, the less likely it is for the poorer country to accept the agreement. The reason has to do with the high cost of efficient technology.

One implication of this finding is that such linked trade agreements are more likely to work if the trading partners are relatively similar in wealth and access to technology.