石川 城太

ABSTRACT This paper studies how carbon pricing affects greenhouse gas (GHG) emissions from international transport, production, and consumption of traded goods by modeling the international transport sector explicitly. Strategic behavior of a transport firm generates a novel mechanism of carbon leakage across borders and sectors. The effectiveness of carbon pricing depends on whether the backhaul problem (i.e., the imbalance of shipping volume in outgoing and incoming routes) is present. If the backhaul problem is absent, carbon pricing is effective in reducing global GHG emissions. With the backhaul problem, carbon pricing on goods production results in cross‐border carbon leakage. However, strategic freight‐rate setting by the transport firm mitigates this leakage. The opportunity for foreign direct investment (FDI) also affects carbon‐pricing effectiveness because the transport firm tries to deter FDI. Surprisingly, carbon pricing in the transport sector may not affect GHG emissions at all. Moreover, domestic carbon pricing on goods production may decrease GHG emissions from both transport and foreign production even if there is no domestic production under FDI.

This paper incorporates key stylized facts about the transport sector into the conventional international oligopoly model and explores how protectionist policies perform differently when transport costs are endogenous and subject to the backhaul problem (i.e., the imbalance of shipping volume in outgoing and incoming routes). A country’s protectionist policies, which benefit domestic firms and harm foreign firms in the conventional model, can harm domestic firms and benefit foreign firms if carriers avoid the backhaul problem. Protectionist policies may also lead to a facilitating practice. In the absence of the backhaul problem, both domestic and foreign consumers lose from protectionist policies.

As a result of global warming, carbon taxes and emissions trading policies are in the spotlight. However, lack of cross-country coordination can cause carbon leakage and increases in emissions. This column analyses the effectiveness of carbon taxes and border tax adjustment policies in reducing emissions and shaping firms’ decisions on abatement investment and firm location. It shows that a higher carbon tax can sometimes lead to higher global emissions and discourage investment in clean technology. Likewise, border tax adjustments should be designed carefully to ensure lower emissions and compatibility with WTO rules.

The paper analyzes multinational enterprises' incentives to manipulate internal transfer prices to take advantage of tax differences across countries, and implications of transfer-pricing regulations as a countermeasure against such profit shifting. We find that tax-motivated foreign direct investment (FDI) may entail inefficient internal production but may benefit consumers. Thus, encouraging transfer-pricing behavior to some extent can enhance social welfare. Furthermore, we consider tax competition between two countries to explore its interplay with transfer-pricing regulations. We show that the FDI source country will be willing to set a higher tax rate and tolerate some profit shifting to a tax haven country if the regulation is tight enough. We also indicate a novel mechanism through which it is the larger country that undertakes tax-motivated FDI, the pattern we often observe in reality.

In international trade, transportation requires a round trip for which a transport firm has to commit to shipping capacity that is sufficient to meet the maximum shipping volume. This may cause the “backhaul problem.” Trade theory suggests that, facing the problem, transport firms with market power adjust their freight rates strategically when import tariffs change. As a consequence, a country reducing its import tariffs may experience an increase in exports as well as imports. Using worldwide data covering 1995–2007, we find evidence that supports these predictions: a 1% reduction in an importer's tariffs increases the import freight rates by around 0.8%; decreases the export freight rates by around 1.1%; and increases the export quantity by 0.6% to 1%. These findings indicate a new mechanism through which import-tariff reductions lead to export expansions.

It is well known that multinational enterprises take advantage of corporate tax systems worldwide to avoid taxation. Transfer pricing is one common method used for profit-shifting, as intra-firm transactions are shielded from the market mechanism. Numerous guidelines and regulations have been implemented to tackle such profit-shifting, but challenges remain. This column theoretically explores how one such regulation, the ‘arm’s length principle’, affects the licensing strategies of multinationals in the presence of a tax haven. It shows that the mere existence of this principle may lead to further profit-shifting and may worsen the welfare of high-tax countries.

To address the issue of tax avoidance by multinational enterprises, governments impose transfer-pricing rules to control transfer-price manipulation. Using a theoretical framework allowing for the possibility of profit shifting, this column explores the interplay between transfer-pricing regulations and tax competition. It finds that the nature of tax competition can depend on the tightness of transfer-pricing regulation, and a tax-haven country does not always prefer lax transfer-pricing regulation. Thus, the incentives of the host and FDI source country can be aligned to set up global regulatory standards for transfer pricing.

We examine how trade liberalization affects South’s incentive to protect intellectual property rights (IPR) in a North–South duopoly model where a low‐cost North firm competes with a high‐cost South firm in the South market. The North firm serves the South market through either exports or foreign direct investment (FDI). The extent of effective cost difference between North and South depends on South’s imitation, which in turn depends on South’s IPR protection and absorptive capacity and North firm’s location choice, all of which are endogenously determined in our model. For a given level of IPR protection, South’s absorptive capacity under exports may be greater than under FDI. Even though innovation is exogenous to the model (and hence unaffected by South’s IPR policy), strengthening IPR protection in South can improve its welfare. The relationship between trade costs and the degree of IPR protection that maximizes South welfare is non‐monotone. In particular, South has an incentive to protect IPR only when trade costs are moderate. When masking technology or licensing is incorporated into the model, however, some protection of IPR may be optimal for South eve

Trade barriers due to transport costs are as large as those due to tariffs. This paper incorporates the transport sector into a standard model of international trade with perfectly competitive output sectors and studies the effects of trade and industrial policies. Transport firms need to commit to a shipping capacity sufficient for a round trip, with a possible imbalance of shipping volumes in two directions. This imbalance is known as the "backhaul problem." As transport firms attempt to avoid this problem, a tariff in one sector may affect other independent import and/or export sectors. In particular, domestic tariffs may backfire: domestic exports may also decrease, harming domestic export sectors and the domestic economy. This finding contributes to the literature on how import liberalization may generate a positive effect on the liberalizing country's exports by identifying a new channel through endogenous changes in transport costs given the backhaul problem.

This paper studies greenhouse-gas emission (GHG) controls in the presence of international carbon leakage through international firm relocation. In a new economic geography model (NEG model) with two countries (‘North’ and ‘South’), only North sets a target for GHG emissions. We compare the consequences of emission quotas and emission taxes under trade liberalization on location of two manufacturing sectors with different emission intensities and degrees of carbon leakage. With low trade costs, further trade liberalization increases global emissions by facilitating carbon leakage. Regulation by quotas leads to spatial sorting, resulting in less carbon leakage and less global emissions than regulation by taxes.

For models of international trade to accurately represent the real-world costs, transport costs cannot be ignored. This column argues that, additionally, we cannot assume that transport costs are symmetrical, because of a backhaul capacity problem that constrains international shipping. Domestic tariffs, which benefit the domestic import sector and harm the foreign export sector in standard models of international trade, can also harm the domestic export sector and benefit the foreign import sector.

We analyze the provision of repair services (aftermarket services that are required for a certain fraction of durable units after sales) through an international duopoly model in which a domestic firm and a foreign firm compete in the domestic market. Trade liberalization in goods, if not accompanied by the liberalization of foreign direct investment (FDI) in services, induces the domestic firm to establish service facilities for repairing the foreign firm’s products. This weakens the firms’ competition in the product market, and the resulting anti-competitive effect hurts consumers and<br /> reduces world welfare. Despite the anti-competitive effect, trade liberalization may also hurt the foreign firm because the repairs reduce the sales of the imported good in the product market. Liberalization of service FDI helps resolve the problem because it induces the foreign firm to establish service facilities for its own products.

Using the footloose capital model with two countries, this paper studies different impacts of emission taxes and quotas on firm location and global emissions under trade liberalization. If only one country (North) sets a target of emissions, firms may have incentive to relocate to the other country (South). That is, the pollution haven effect could arise. We show that a further decrease in trade costs, given an emission regulation in North, increases firm relocation and global emissions only if trade costs are relatively low. Moreover, compared with emission taxes, emission quotas moderate firm relocation, which results in less pollution haven and hence less global emissions.

This paper studies environmental management policy when two fossil-fuel-consuming countries non-cooperatively regulate greenhouse-gas emissions through emission taxes <br /> or quotas. The presence of carbon leakage caused by fuel-price changes affects the tax-quota equivalence. We explore each country&#039;s incentive to choose a policy instrument in a two-stage policy choice game and find subgame-perfect Nash equilibria. This sheds new light on the questions of which policy instrument is more stringent and of why adopted instruments could be different among countries. In particular, our result suggests a reason why developing countries tend to employ emission taxes, while developed countries tend to adopt quotas.

We explore the effects of environmental and trade policies with negative consumption externalities when a domestic firm and a foreign rival produce imperfect substitutes and compete in the domestic market. Consumption of the foreign product generates more emissions than that of the domestic product. Emission taxes reduce emissions, harm the foreign firm, but may benefit the domestic firm. Tariffs could mitigate externalities more "effectively" than emission taxes. Consumption subsides provided to the domestic product may raise emissions and worsen domestic welfare. Stringent environmental policies may induce the foreign firm to produce an environmentally friendly good, though environmental damages may increase.