Title: Trans-boundary pollution, free trade agreement/economic partnership agreement and economic welfare

Authors: Kenji Kondoh

Addresses: School of Economics, Chukyo University, 101-2 Yagotohonmachi Showaku, Nagoya 4660856, Japan

Abstract: In this article, using a simplified three-country Copeland and Taylor (1999) model, we analyse the welfare effects of a free trade agreement (FTA)/economic partnership agreement (EPA), given the existence of trans-boundary pollution. We investigate the case where the developed home country J (Japan) concludes an FTA/EPA with one of the two developing foreign countries. Country C (China) generates trans-boundary pollution, while there is no pollution originating from country P (the Philippines). We determine the condition in which country J gains from the FTA/EPA; moreover, under certain conditions, country J should conclude the FTA/EPA with country C and not with P, which is exactly in contrast with the actual policy of the Japanese government.

Keywords: EPA; economic partnership agreements; FTA; free trade agreements; terms of trade effect; trade creation effect; trans-boundary pollution; economic welfare; Japan; China; Philippines.

DOI: 10.1504/IJEBR.2009.022769

International Journal of Economics and Business Research, 2009 Vol.1 No.1, pp.136 - 152

Published online: 26 Jan 2009 *

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