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Sustainable Trade Agreements: Much Ado about Nothing?

Environmental Policy
Interest Groups
Negotiation
Trade
International relations
Julia Göhringer
Universität Konstanz
Julia Göhringer
Universität Konstanz

Abstract

In times of volatile commodity prices, one way to improve resource security is to conclude trade agreements with resource-rich countries. In these countries, extractive activities are conducted, which are frequently criticized to be environmentally hazardous. Since there is a trend to include non-trade issues in trade agreements, interests of the extractive industry and environmental objectives might clash in the agreements' negotiations. Contributing to the literature on the design of trade agreements, this paper explores whether there is a scope to include both - environmental objectives and interests of the extractive industry of resource-rich countries - in trade agreements. From a rational perspective, I assume that resource-rich countries sign trade agreements, which reflect their domestic interests. Therefore, I argue that countries with abundant natural resources sign trade agreements without environmental provisions. In order to test this theoretical expectation, I construct a panel data set for the years 1990 - 2014 and apply fixed effects logit models. Indeed, I find that an increase in resource wealth increases the log-odds that a resource-rich country signs a trade agreement. However, as environmental protection in the resource-rich country increases, the effect of commodity exports on agreements including environmental objectives becomes negative. These findings imply that resource-abundant countries have an interest in signing trade agreements. However, it seems improbable to reconcile environmental objectives and interests of the extractive industry in trade agreements.