Skip to main content

Export Competition and the Remission of Domestic Environmental Taxes

Abstract

We consider the use of border adjustments to compensate exporters for domestic environmental taxes imposed on an intermediate good. A model of successive oligopoly is used to consider the appropriate border adjustments. In this set-up, the relative importance of the forward incidence of the environmental tax and the backward incidence of the remission play a key role. The results highlight that the simple rule employed by GATT/WTO to set the export remittance equal to the level of the environmental tax is likely to be inappropriate.

This is a preview of subscription content, access via your institution.

References

  • Anderson, K. (1998). “Environmental and Labor Standards: What Role for the WTO?” In A. O. Krueger (ed.), The WTO as an International Organization. Chicago: University of Chicago Press.

    Google Scholar 

  • Bagwell, K. and R. W. Staiger. (2001). “The WTO as a Mechanism for Securing Market Access Property Rights: Implications for Global Labor and Environmental Issues,” Journal of Economic Perspectives 15, 69–88.

    Google Scholar 

  • Barrett, S. (1994). “Strategic Environmental Policy and International Trade,” Journal of Public Economics 54, 325–338.

    Article  Google Scholar 

  • Besley, T. J. and H. S. Rosen. (1999). “Sales Taxes and Prices: An Empirical Analysis,” National Tax Journal 52, 157–178.

    Google Scholar 

  • Brander, J. A. and B. J. Spencer. (1985). “Export Subsidies and International Market Share Rivalry,” Journal of International Economics 18, 83–100.

    Article  Google Scholar 

  • Burguet, R. and J. Sempere. (2003). “Trade Liberalisation, Environmental Policy, and Welfare,” Journal of Environmental Economics and Management 46, 25–37.

    Article  Google Scholar 

  • Colangelo, G. and U. Galmarini. (2001). “Ad valorem Taxation on Intermediate Goods in Oligopoly,” International Tax and Public Finance 8, 53–74.

    Article  Google Scholar 

  • Conrad, K. (1993). “Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy,” Journal of Environmental Economics and Management 25, 121–135.

    Article  Google Scholar 

  • Delipalla, S. and O. O’Donnell. (2001). “Estimating Tax Incidence, Market Power and Market Conduct: The European Cigarette Industry,” International Journal of Industrial Organisation 19, 885–908.

    Article  Google Scholar 

  • Demaret, P. and R. Stewardson. (1994). “Border Tax Adjustments under GATT and EC Law and General Implications for Environmental Taxes,” Journal of World Trad 28, 5–65.

    Google Scholar 

  • Doyle, M. P. (1997). “The Effects of Interest Rates and Taxes on New Car Prices,” Washington, DC: Board of Governors of the Federal Reserve System.

    Google Scholar 

  • Fullerton, D. and G. E. Metcalf. (2002). “Tax Incidence.” In A.J. Auerbach and M. Feldstein (eds.), Handbook of Public Economics. Amsterdam: Elsevier Science.

    Google Scholar 

  • Harris, J. E. (1987). “The 1983 Increase in the Federal Cigarette Excise Tax,” Tax Policy and the Economy 1, 87–111.

    Google Scholar 

  • Ishikawa, J. and K.-D. Lee. (1997). “Back-Firing Tariffs in Vertically Related Markets,” Journal of International Economics 42, 395–423.

    Article  Google Scholar 

  • Ishikawa, J. and B. J. Spencer. (1999). “Rent-Shifting Export Subsidies with an Intermediate Product,” Journal of International Economics 48, 199–232.

    Article  Google Scholar 

  • Kennedy, P. W. (1994). “Equilibrium Pollution Taxes in Open Economies with Imperfect Competition,” Journal of Environmental Economics and Management 27, 49–63.

    Article  Google Scholar 

  • Leahy, D. and J. P. Neary. (2001). “Robust Rules for Industrial Policy in Open Economies,” Journal of International Trade and Economic Development 10, 393–409.

    Article  Google Scholar 

  • Poterba, J. M. and J. M. Rotemberg. (1995). “Environmental Taxes on Intermediate and Final Goods when both can be Imported,” International Tax and Public Finance 2, 221–228.

    Article  Google Scholar 

  • Walz, U. and D. Wellisch. (1997). “Is Free Trade in the Interest of Exporting Countries when there is Ecological Dumping?” Journal of Public Economics 66, 275–291.

    Article  Google Scholar 

  • World Trade Organization. (1997). “Taxes and Charges for Environmental Purposes-Border Tax Adjustments,” Committee on Trade and the Environment, WT/CTE/W/47. Geneva, World Trade Organization.

  • Young, D. J. and A. Bielinska-Kwapisz. (2002). “Alcohol Taxes and Beverage Prices,” National Tax Journal 55, 57–73.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Steve Mccorriston.

Additional information

JEL Code: H87, Q38

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Mccorriston, S., Sheldon, I. Export Competition and the Remission of Domestic Environmental Taxes. Int Tax Public Finan 12, 627–637 (2005). https://doi.org/10.1007/s10797-005-0476-x

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10797-005-0476-x

Keywords

  • environmental taxes
  • border adjustments
  • imperfect competition