Trans-boundary pollution, free trade agreement/economic partnership agreement and economic welfare
by Kenji Kondoh
International Journal of Economics and Business Research (IJEBR), Vol. 1, No. 1, 2009

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.

Online publication date: Mon, 26-Jan-2009

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