The Effectiveness of Environmental Provisions in Regional Trade Agreements.

This article examines the effectiveness of environmental provisions in regional trade agreements (RTAs) in mitigating deforestation linked to trade liberalization. Using high-resolution satellite data on forest loss and a novel dataset detailing RTA provisions, the study employs a matched triple-difference econometric approach to address the endogeneity of environmental clause inclusion. The findings indicate that RTAs without forest-related provisions lead to significant increases in deforestation—particularly in tropical, developing countries with high biodiversity—while RTAs that include provisions aimed at protecting forests and biodiversity largely offset these increases. The mitigation effect appears primarily driven by reduced agricultural expansion and trade, rather than changes in forest product markets, and does not depend on specialized environmental dispute settlement mechanisms but rather on general enforceability within RTAs. These results are supported by complementary country-level event study analyses and suggest that environmental provisions in trade agreements can serve as effective tools for limiting environmental harm associated with trade liberalization.