Environment, Statistics and Policy (ESP)

About the ESP Project

ESP examines the impacts of environmental policies on trade and concludes that the measures taken to protect the environment are relatively inexpensive, short-term in duration, and often well worth the price in trade terms. Research for these studies was directed by Dr. James Lee of the Trade Environment Database (TED) project at American University and was prepared for the Global Environment & Trade Study (GETS) at Yale University.

These studies analyze trade flows in cases of trade and environment dispute. The cases are drawn from a larger set of over 300 such cases from compiled by the TED project. The cases, shown below, were chosen on the basis of two criteria: first, because they have been subject of dispute in multilateral fora, and second, were in place during the 1990s. These criteria are intended to provide a broad and current perspective to the research.

The Environment, Statistics and Policy (ESP) Project compiles cases of environment and the role of statistics in them. The ESP effort links real world policy issues in the envvironemal community with approaches of the Mandala Projects. This approach necessarily includes a variety differing technical aproaches, including cost benefit analysis, comparative case studies, and others. We provide expertise in the issues and statistical approaches inherent to such an endeavor and Web tools to augment those capabilities. This includes undertaking case guides, developing analytical tools, and or methods related issues.

1. Japan Apple Import Ban
2. US Tuna-Dolphin Case
3. US Ban on Immature Canadian Lobster
4. EC Ban on Canadian Lumber for Nematodes
5. Environmental Beer Taxes in Ontario, Canada
6. US Ban on Venezuelan Gasoline Imports
7. US Sanctions on Taiwan for Endangered Species Trade
8. US Shrimp and Sea Turtle Case
9. US Ban on Driftnets

The cases are compared on the basis of several common categories. This comparison reveals that the set has a decided U.S. focus, and one that is import-oriented. The import ban is by far the most frequently occurring measure (7 cases) and the United States is the most frequent country involved (6 cases). It is also the exporter of concern in 2 cases. NAFTA countries are a party in every case. One-third of the cases involve only NAFTA members.

How significant is the impact on trade flows in the nine cases? The data show two distinct groups. One group saw minimal trade declines, with trade losses of around $50 million per year. The other saw greater declines, of around $250 million per year. The low group usually includes measures that protect a particular species, the high group includes measures that protect general environments, such as forests or the air.

Trends in the nine cases often show trade losses are a temporary phenomenon that adjust to prior levels after a period of transition. In some of the cases, trade was already on the decline prior to the measure, and in others, the product was stockpiled and sold in other markets. The cost of complying to environmental measures often exceeded the actual value of annual trade loss. Finally, an initial assessment of the trade flow costs compared to the environmental benefits show a favorable rate of return.

ESP examines the effects of environmental measures on international trade. It describes a series of case studies where environmental and trade measures intersect and, for each, attempts to establish some basis for estimating the trade costs of these measures.

ESP is composed of four principle parts.

• Part I provides a brief review of literature on the subject.
• Part II presents the nine case studies.
  For each, it defines the measure in question and provides estimates of economic trade impact.
• Part III compares and contrasts the nine case studies and offers some conclusions about valuating environmental measures.
• Part IV delineates several critical conclusions, reviews findings and suggests next steps.

Because of the types of legal measures that relate to protecting the environment, they are often non-tariff instruments. This research, then, is a natural outgrowth of other efforts over the last two decades to measure, and effectively regulate, the impact of non-tariff barriers to trade. That effort, however, has been difficult and is yet to substantially reveal a body of knowledge that is generally accepted by researchers and policy makers alike.

There are a number of data sets that focus on environmental policies1. The USDA Economic Research Service (ERS) provides a data set of policies affecting agriculture, including impacts on consumers and producers2. The OECD and the U.S. Agency for International Development also provide a similar service3. Special data sets that focus on global policies are being compiled by ERS and UNCTAD. UNCTAD also has a "GREEN" database of non-tariff barriers and specifies when there are environmental considerations. Still, other databases provide information on the environment from which valuation calculations can be made4.

Data sets absent conceptual frameworks are often not useful. Steven Charnovitz provides a taxonomy of international trade measures, a step in creating an organized approach to knowledge that may assist in conceptually organizing this data5. A related requirement is to translate how policies result in these measurable impacts.

"Several studies have analyzed the economic impact of environmental policy on standard results in trade. See, for example, Siebert (1977, 1985), Pethig (1976), McGuire (1982), Baumol and Oates (1988) and Blackhurst (1977). Siebert (1985) summarizes the main results of these studies regarding the impact of environmental policy on comparative advantage6."

Some have surveyed the literature on measuring environmental impacts on an economic basis. Generally, values can be imputed directly or indirectly or a combination of both. Direct valuation includes measures such as (1) national income product accounts, (2) potential sales loss, and (3) value of non-marketed resources. Indirect valuation techniques largely use contingent valuation (surveys of popularly-accepted costs and benefits)7.

Some work has been done on estimating the impact of environmental control costs, including those that affect the trade balance. These include "D'Arge (1974), OECD (1978), Magee and Ford (1972), Pasurka (1985), Richardson and Mutti (1976, 1977), Walter (1973), Ugelow (1982), US DOC (1975), Yeazer and Philipson (1974), Chapman (1991), Robison (1988), Tobey (1990). The methodologies are quite varied, making the comparisons between studies difficult8."

With respect to specifically measuring the impact of environmental trade standards, in the form of non-tariff barriers, Judith Dean makes the following observation.

No literature exists in this area. . . Conventional assessment of NTBs seeks to translate them into tariff-equivalents. Along these lines, Pearson makes two suggestions. One could measure the additional costs incurred by the exporter to comply with different standards. Pearson measures the number and/or value of shipments denied entry due to failure to meet standards. Pearson measures the value of imports detained in fish, shellfish, fruits, and vegetables. He finds that food ERS [environmentally related product standards] have a modest impact on trade, but can be significant for individual commodities9.

Part II. The Cases

This section will describe the nine cases and critically analyze them on a categorical case study basis. While selected in accordance with the two key criteria noted above, the breadth and timeliness, it also reveals the varied kinds of cases that may arise. First, however, a note on the concepts and tools used in this research.

The cases and concepts in this study are drawn from a larger project. The Trade Environment Database (TED) was created by Dr. James R. Lee of the School of International Service, Washington, DC. It is a collection of case studies on trade and environment that are organized around 28 categories of reporting. These categories are policy-oriented variables, such as the environmental problem in the case, the relevant legal measure, or the type of habitat at issue in the case. Over 300 case studies are available on a World Wide Web site. Computer software written in Visual Basic can also be used to sort and select case on the basis of these variables. This project has been supported by a number of organizations, including the U.S. Environmental Protection Agency.

Besides the adoption of this conceptual framework and categorical application, the following will also make use of data compiled with respect to the nine cases. For each case, relevant trade categories were identified using the Standard International Trade Classification (SITC), revision 3, for the products at issue in the case. These tariff lines and the codes are matched in Appendix F. With the proper categories it was then possible to run data searches for the period under which these barriers were relevant. These data searches and retrievals were carried out using software called "GREENTRADE."

UNCTAD developed GREENTRADE as a computerized information system that allows retrieval of trade data and other information on environmental product concerns. GREENTRADE is an outgrowth of UNCTAD's Trade Control Measures Information System (TCMIS). Its specific purpose is to comprehensively cover environmental measures that potentially bear on international trade.

However, these two efforts have adopted approaches that sometimes are similar and sometimes different. TED builds an inventory of case studies while GREENTRADE's is constructed from data. TED is top-down in its approach, where the case studies include data. GREENTRADE is bottom-up, in that the data can be combined to form case issues.

Case studies can be comparable if they are categorical in nature. These categories can be ordered and evaluated on a uni-dimensional basis (for example, size of economic impact) or on a multi-dimensional basis (for example, size of economic impacts by type of measure). While any such frequency counts lack true statistical significance, they can still be quite revealing about attributes of trade and the environment in disputes. The nine cases are described by using a few of the 28 categories in the TED case studies (see Appendix A). The cases will be presented in the following format (see Table 1).

The cases:

1. Japan Apple Import Ban
2. US Tuna-Dolphin Case
3. US Ban on Immature Canadian Lobster
4. EC Ban on Canadian Lumber for Nematodes
5. Environmental Beer Taxes in Ontario, Canada
6. US Ban on Venezuelan Gasoline Imports
7. US Sanctions on Taiwan for Endangered Species Trade
8. US Shrimp and Sea Turtle Case
9. US Ban on Driftnets

References

1. Carl Mabbs-Zeno and John Antle, "Measuring the Impact of Government Policies on the Environment," 13-19, in John Sullivan, editor, Environmental Policies: Implications for Agricultural Trade, U.S. Department of Agriculture, Economic Research Service, Foreign Agricultural Economic Report 252, June, 1994.

2. Economic Research Service, U.S. Department of Agriculture, Global Review of Agricultural Policies, Staff Report AGES880304, 1988.

3. Agency for International Development, US Department of State, "A Policy Taxonomy and Analysis of Policies Affecting Natural Resources and the Environment," APAP II, No. 406, 1992.

4. Jan-Stefan Fritz, "A Survey of Environmental Monitoring and Information Management Programmes of International Organizations," U.S. Environmental Programme, 1990; UNEP, GEMS: Global Environment Monitoring System, Nairobi, 1990; and UNEP, GRIDS: Global Resource Information Database, Nairobi, 1990.

5. Steven Charnovitz, "A Taxonomy of International Trade Measures," Georgetown International Environmental Law Review, 6/1 (Winter, 1995).

6. Judith Dean, "Trade and Environment: A Survey of Literature." 15, in Patrick Low, editor, International Trade and the Environment, The World Bank, Washington, DC, 1992.

7. Rachel Beattie, "Environmental Accounting: Including the Environment in Measures of Well-Being," 6-12, in John Sullivan, editor, Environmental Policies: Implications for Agricultural Trade, U.S. Department of Agriculture, Economic Research Service, Foreign Agricultural Economic Report 252, June, 1994.

8. Judith Dean, "Trade and Environment: A Survey of Literature." 15, in Patrick Low, editor, International Trade and the Environment, The World Bank, Washington, DC, 1992.

9. Judith Dean, "Trade and Environment".