Environmental regulations and agricultural product trade: The case of Thailand

Abstract

The purpose of this study is to explain the impact of various factors, especially environmental regulations, on the agricultural trade flows between Thailand and its partner countries. These factors include economic size, distance, and the environmental regulations based on the gravity model of Tinbergen (1962). The environmental regulations are the carbon tax and emissions trading system (ETS) under the Kyoto Protocol. The gravity model of the study is evaluated by the multivariate autoregressive state-space approach. As the results show, environmental regulations under the Kyoto Protocol, including the carbon tax and ETS, boost agricultural product trade between Thailand and its partner countries. Based on the gravity model of Tinbergen (1962), the main factors include gross domestic product per capita and distance. First, the gross domestic product per capita of Thailand positively affects agricultural product trade between Thailand and the partner countries, including China, Hong Kong, and Japan, but it has a negative relation with the agricultural product trade between Thailand and the partner countries, including Indonesia, Korea, Malaysia, the United Kingdom, and the United States.