Issue linkage and issue tie-in in multilateral negotiations

This paper studies the impact of a World Trade Organization withdrawal of trade concessions against countries that fail to respect globally recognized environmental standards. We show that a punishing tariff can be effective when environmental and trade policies are endogenous. When required standards are not too stringent with respect to the marginal damage of pollution, compliance along with free trade as a reward is the unique equilibrium outcome. A positive optimal tariff in the case of non-compliance prevents complete relocation to pollution havens, but only works as a successful credible threat and does not emerge in equilibrium.

What is the optimal design for a set of self-enforcing international agreements? We study a dynamic model with two asymmetric countries and n policy dilemmas, and show that having separate agreements on different policy issues is generally suboptimal. The outcome of separate agreements can always be replicated by one agreement linking all issues at stake, while issue linkage may improve the best enforceable outcome by: a) improving the allocation of scarce enforcement power among issues/countries; and b) creating additional enforcement power when policy issues are substitutes (countries' objective functions are submodular). Credible sanctions are outlined that are robust to WTO-induced renegotiation.

SSRN Electronic Journal, 2003

This paper analyses issue linkage as a way to increase co-operation on issues where incentives to free-ride are strong. The goal is to determine under what conditions players prefer to link negotiations on two different issues rather than to negotiate on the two issues separately. Suppose that players are asked to vote on issue linkage before starting negotiations. Under what conditions would they vote in favour of issue linkage?

2001

1996

Governments' desire to ameliorate environmental problems may conflict with other goals. Policy levels which balance different objectives can be altered by policy changes in other countries. A decrease in the importance of the pollution problem, or an increase in its global extent, increase the likelihood that tighter environmental regulations in one region induce laxer policies elsewhere. The transboundary character and the importance of environmental externalities also affect the amount of cooperation needed to improve members' welfare in a coalition. More global pollution problems require a larger coalition. However, the critical coalition size may be larger or smaller for more severe problems.

SSRN Electronic Journal, 1998

The amount of cooperation needed to improve the welfal"e of signatories of International Environmental Agreements (lEAs), in the presence of market imperfections, depends on the characteristics of pollution. In a dynamic model, the conventional wisdom on the effect of freeriding needs to be modified for certain types of pollution problems. For local pollution problems, a sufficient level of free-riding actually promotes signatories' welfarc. For global pollution problems, the conventional wisdom is correct insofar as free-riding makes it more difficult to form a suecessful lEA. However, for some global pollution problems, free-tiding may disappeaT. A static model may overstate or understate the difficulty of forming a successful lEA. The effect of an lEA is sensitive to differences between the duration of the lEA and agents' planning horizon.

RePEc: Research Papers in Economics, 1997

The amount of cooperation needed to improve the welfal"e of signatories of International Environmental Agreements (lEAs), in the presence of market imperfections, depends on the characteristics of pollution. In a dynamic model, the conventional wisdom on the effect of freeriding needs to be modified for certain types of pollution problems. For local pollution problems, a sufficient level of free-riding actually promotes signatories' welfarc. For global pollution problems, the conventional wisdom is correct insofar as free-riding makes it more difficult to form a suecessful lEA. However, for some global pollution problems, free-tiding may disappeaT. A static model may overstate or understate the difficulty of forming a successful lEA. The effect of an lEA is sensitive to differences between the duration of the lEA and agents' planning horizon.

Handbook of International Trade, Volume II, 2004

We examine the implications for the viability of multilateral cooperation of di¤erent legal principles governing how separate international agreements relate to each other. We contrast three alternative legal regimes: conditionality-making cooperation in one area a condition for cooperation in another-separation-forbidding sanctions in one area to be used to enforce cooperation in others-and open rules, i.e. absence of any restriction on the patterns of cross-issue cooperation arrangements and sanctions. As an example, we focus on a scenario where countries can enter into selective and separate binding trade and environmental agreements with di¤erent partners. Our analysis suggests that conditionality is more likely to facilitate multilateral, multi-issue cooperation in situations where the environmental policy stakes are small relative to the welfare e¤ects of trade policies; when the costs of environmental compliance are high, a conditionality rule can hinder multilateral cooperation. Separation can undermine cooperation by limiting punishment, but can also promote broad cooperation by making partial cooperation more di¢cult to sustain. Thus, how di¤erent linkage regimes a¤ect multilateral negotiations depends on the structure of cooperation incentives for the countries involved.

European Economic Review, 1998

The aim of this paper is to discuss the role played by international institutions in achieving effective International Environmental Agreements. We emphasise the strategic nature of environmental negotiations and use a game theoretic model of coalitional bargaining to illustrate the main issues. We argue that international institutions can intervene in the framing of the strategic interactions between countries (i.e. setting the rules of the negotiation game) and can influence the actual agreement reached when different outcomes of the negotiation game can be equilibria.

International Affairs and Global Strategy, 2019

Conflict exists between World Trade Agreement (WTO) and Multilateral Environmental Agreements (MEAs). This is because governments when negotiating MEAs they include measures which sanction trade coercion and create provisions to restrict trade despite WTO rules to which the same Governments subscribe, does not permit such use of trade measures. After analyzing the relationship between the WTO and MEAs, this writing argues that the growing global interconnectedness, both in economic and environment, needs coherence and coordination in trade and environmental policies, rules, and institutions.