The role of interdependence in the adoption of environmental provisions in preferential trade agreements: a spatial econometric approach

The increasing number of environmental provisions being signed in preferential trade agreements (PTAs) has led to research trying to establish the reasons why countries include these environmental provisions in their PTAs. However, this research has not taken into account the potential interdependence between countries when they adopt environmental provisions in their PTAs. Theoretical models of PTA formation have shown that countries do not take decisions in isolation, but take into account the actions of other countries. This interdependence between countries arises because countries trade with one another. In this paper, we establish what are the determinants of the adoption by countries of environmental provisions in PTAs and whether countries are influenced by other countries when they adopt these provisions. Our empirical approach takes into
account the potential existence of both time dependency and interdependence between countries in the adoption of environmental provisions in PTAs. Our main finding is that spatial interdependence is present in our data. For most environmental provisions, there is a positive interdependence and the channel through which this interdependence operates is the amount of exports between countries.