Exploring green provisions in international trade agreements for economic sustainability through promoting trade flows

Abstract

Background: Policies fostering green production and consumption help promote sustainability. Countries can be encouraged to adopt such policies through various international treaties. One such tool is international trade agreements that incorporate specific provisions covering goals under sustainable/green policies. As per their nature, one may call them green provisions (GPs). The impact of GPs on sustainability can be understood through the promotion of green production and consumption. However, the economic effects of these provisions remain dubious. Existing literature has tried to quantify the aggregate impact of GPs on economic growth via trade flows but failed to identify the specific set of GPs impacting trade flows. The present study tries to fill the gap and highlight a few GPs that are more impactful. Method: Recent advancements in estimation methods allow for identifying the specific set of GPs and their impact on trade flows. The study uses gravity modeling in a machine learning framework to identify the GPs with a non-zero impact on trade flows. The study used a Plug-in lasso to identify the relevant GPs and further iceberg lasso regression analysis to examine highly correlated GPs. Result: The study confirms the positive impact of GPs on overall trade and highlights the importance of strategically including specific GPs in trade agreements to enhance trade flows. The study found that GPs related to harmonizing environmental policies, promoting international energy programs, protecting wild fauna and flora & preventing illegal trade, among others, have trade-enhancing effects. Conclusion: The study results can help countries engaging in a trade negotiation consider including an environmental chapter(s) with these targeted GPs. From the policy perspective, identifying trade and sustainability-enhancing GPs would have a more significant trade-promoting impact. These GPs could be considered for future negotiations while signing trade agreements.