Reinvigorating trade integration should be a key component of the global policy agenda to boost growth. Trade policy’s new frontiers such as services, regulatory cooperation, and trade and investment complementarities carry high potential to bolster efficiency and productivity. But with governments differing on whether to continue the WTO Doha Round, there is an urgent need to identify a path for the global trading system in today’s more complex trade policy landscape. A long interregnum without a path forward would risk fragmenting the global trade system and undermining its governance. Tackling trade policy issues important to the global economy may require flexible approaches to multilateral negotiations, including modalities such as plurilaterals. Enhanced coherence efforts are also needed to ensure that regional trade agreements and multilateralism coexist productively.
This paper seeks to contribute to the unresolved issue of the effect of economic integration on environmental policy. In particular, we discuss the joint impact of trade openness and political uncertainty. Our theory predicts that the effect of trade integreation on the environment is conditional on the degree of political uncertainty. Trade integration raises the stringency of environmental policies, but the effect is reduced when the degree of political uncertainty is great. Political uncertainty has a positive effect on environmental policy as it reduces lobbying efforts. Applying our model to a unique data set of primarily developing countries, the empirical findings support the theory and are robust under alterntive specifications.