Barriers to trade in environmental goods: How important they are and what should developing countries expect from their removal

Few developing countries have participated in the environmental goods agreement (EGA) negotiations to reduce barriers on trade in Environmental Goods (EGs). Reasons for this reluctance are first reviewed along with a comprehensive description of barriers to trade (tariffs and NTBs) on two lists of EGs used in negotiations: the APEC list comprising mostly industrial products representative of high-income countries that served as point of departure on the negotiations for an Environmental Goods Agreement (EGA) and a list of Environmentally Preferable Products (EPPs) more representative of the perceived interests of developing countries. The paper then revisits and extends the literature on the estimation of barriers to trade in EGs for these lists. These estimates are carried out with a structural gravity model with: (i) new data on bilateral (rather than MFN) tariffs, and a new classification of NTBs; (ii) a measure of regulatory overlap in bilateral trade. Results show that tariffs reduce the intensity of bilateral trade. Regulatory harmonization, as captured by an increase in regulatory overlap is also estimated to be conducive to more intense bilateral trade.