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    Trade in Used Cars in the Americas: Good for the Environment?

    By Keith R | January 27, 2009

    Topics: Air Quality, Climate Change, Economics & the Environment, Motor Vehicles | No Comments »

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    A recent working paper by two US economists looks at the environmental consequences of international trade in durable goods through data regarding trade in used cars between the United States and Mexico under the North American Free Trade Agreement (NAFTA).  [A tip of the hat to Rob over at Globalisation and the Environment for alerting me to the paper.]  According to the abstract:

    Previous studies of trade and the environment overwhelmingly focus on how trade affects where goods are produced. However, trade also affects where goods are consumed. In this paper we describe a model of trade with durable goods and non-homothetic preferences. In autarky, low-quality (used) goods are relatively inexpensive in high-income countries and free trade causes these goods to be exported to low-income countries. We then evaluate the environmental consequences of this pattern of trade using evidence from the North American Free Trade Agreement. Since trade restrictions were eliminated for used cars in 2005, over 2.5 million used cars have been exported from the United States to Mexico. Using a unique, vehicle-level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so trade leads average vehicle emissions to decrease in both countries. Total greenhouse gas emissions increase, primarily because trade gives new life to vehicles that otherwise would have been scrapped.

    An interesting study, but I am left with questions.  Perhaps this is covered in the actual full paper — which I cannot read, since I do not subscribe to NBER Working Papers — but it seems to me based on the abstract that this paper looked at the environmental impacts a bit narrowly. The impact of used car exports from the US to Mexico is much broader than impact on air emissions (greenhouse gases and “ordinary” emissions such as NOx, O3, unburnt hydrocarbons, etc.).  What about fuel consumption? For example, the Mexican consumer group El Poder del Consumidor (which is advocating car labels for fuel efficiency & GHG emissions) recently asserted that the fleet average for fuel efficiency in Mexico has dropped since used cars began to be imported more heavily under NAFTA (so Mexico consumes more petrol).

    And what about the waste impact of all those used cars, including the used batteries and tires that must be replaced (Mexico already has significant waste problems in both) in a country that does not have an end-of-life vehicle (ELV) regime?  What about, for example, the mercury switches found in some older vehicles?

    Fluid (lubricant oil, transmission, brake) leaks tend to be more common among older cars, so I wonder about that impact in the aggregate, although I suppose that is difficult to measure in a meaningful fashion.

    This is just the environment angle — there’s also the safety/public health considerations.  Many of the older used vehicles imported do not have the safety features of newer models, and what safety features they have may no longer work properly (things like air bag sensors tend to malfunction with age) or have been disabled by prior owners.

    Besides a broader study of the narrow NAFTA context, I would be interested in one looking at the broader export of used cars from the US to the rest of Latin America & the Caribbean (LAC), which (speaking from firsthand observation from my years living in the Dominican Republic) is big business in some LAC nations.  Many of these nations do not have the environmental safeguards in place that Mexico has (such as they are), so I strongly suspect that the overall environmental impact of the trade there is even more negative. But I would love to see a study or studies that takes a serious look at the issue and either confirms or dispels those suspicions.

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