International trade and externalities Michael

International trade and externalities

Michael Margolis and Jason Shogren point out ("How Trade Politics Affect Invasive Species Control", Resources for the Future discussion paper 04-07) that international trade itself may be a source of negative externalities. Unpleasant invasive species (think zebra muscles in the Great Lakes) may come in the cargo, or in ship ballast water; the movement of cargo may create pollution externalities; trade activity may provide opportunities for the movement of contraband or terrorists. From the abstract:

"Trade has become the main mode of transport for many invasive species including diseases and agricultural pests. Most species are brought to their new homes unintentionally, which constitute a market failure rooted in international trade. Unless it is practical to drive invasion risk to zero, the external costs may justify a tariff..."

The problem is that in a world with interest groups, and interest group contributions to politicians, "The invasive-species tariff is set higher than it would be if government were independent of rent-seeking contributors." "The informational needs required to distinguish disguised protectionism from legitimate public-goods protection are formidable."