The role of international agreements in environmental conservation and its implication to Vietnam.

VIETNAM NATIONAL UNIVERSITY
FACULITY OF ECONOMIC
--------------------------------------------------------YASUKATA FUKAHORI

THE ROLE OF INTERNATIONAL AGREEMENTS IN
ENVIRONMENTAL CONSERVATION AND ITS IMPLICATION TO
VIETNAM

Major: Political Economy
Code:

62.31.01.01

DOCTORAL PHILOSOPHY OF ECONOMICS

Advisor: 1. Associated Professor, Doctor Phi Manh Hong
2. Doctor Phung Xuan Nha

HaNoi, 2008


VIETNAM NATIONAL UNIVERSITY, HANOI
COLLEGE OF ECONOMIC
--------------------------------------------------------YASUKATA FUKAHORI
THE ROLE OF INTERNATIONAL AGREEMENTS IN
ENVIRONMENTAL CONSERVATION AND ITS IMPLICATION TO
VIETNAM

Major: Political Economy
Code:

62.31.01.01

DOCTORAL PHILOSOPHY OF ECONOMICS

Advisor: 1. Associated Professor, Doctor Phi Manh Hong
2. Doctor Phung Xuan Nha

HaNoi, 2008


CONTENTS
Page
Introduction ………………………………………………………………………

1

Chapter I: Economic Theories Related to Environmental Conservation……….

14

1.1.

Theories of Common Pool Resources ……………………………………..

14

1.2.

Theories of Collective Actions and International Agreements …………….

23

1.3.

Coase Theorem …………………………………………………………....

25

1.4.

Game Theory ……………………………………………………….……..

26

1.5.

Other Economic Theories …………………………………………….…...

31

1.6.

Application of Economic Theories to Environmental Conservation……….

36

1.6.1.

Sustainability and Budget Line – Case Study for Forest Conservation…….

36

1.6.2.

Game theory scenarios and possible contribution arrangements of

46

international agreements ………………………………………….……….
1.7.

Summary of Results ………………………………………………….……

88

1.8.

Recommendations …………………………………………………….…...

90

Chapter II: Environmental Conservation in Relation with Trade, ODA and

92

Sustainable Development …………………………………………..…………….
2.1
2.1.1.
2.1.2.
2.1.3.

2.2.
2.2.1.
2.2.2.
2.3
2.3.1.
2.3.2.
2.3.3.

Trade Agreements and Environmental Issues …………………………..….
The New Politics of Trade ………………………………………...………
Trade under Commodity Agreements and Environmental Conservation…..
WTO Dispute Settlement Mechanism and Environmental Conservation .....
Global Environmental Issues ……….……………………………………..
Issues and Problems related to Global Environmental Conservation……….
World Summit for Environment ……………….………………………….
ODA and Environmental Issues …………………………………………..
Trade and ODA …………………………………….……………………..
ODA and Environmental Issues …………………….…………………….
Problem of International Aid …………………………….………………..

92
92
96
100
101
102
103
106
106
107

107


Private Sector ……………………………………………………………..
Transparency …………………………………………………….……….
The Problem of Sovereignty and Economic Forces ………………………
Capacity Building, Education, and International Treaties ………….……..
Sustainable Management of Environmental Natural Resources ……….….
Definitions of Sustainable Development ………………………………….
Economic growth for local welfare and conservation - Sustainable
Development.......................................................................................................
2.4.3. Problems Causing Sustainable Management ……………………..………..
2.5.
Environmental Conservation and International Agreement ……………….
2.5.1. International Negotiation on Environmental Conservation ………………..
2.5.2. Fund Raising under the Existing International Agreements ……………….
2.5.3. ITTO and Forest Conservation …………………………………………….
2.5.4. Limit in conservation by an international agreement organization …………
2.6
Experiences in Other Countries…………………………………………….
2.6.1 Japan ………………………………………………………………………
2.6.2 South Korea ……………………………………………………………….
2.6.3 China ………………………………………………………………………
Chapter III: Issues Related to Vietnam ………………………………………….
2.3.4.
2.3.5.
2.3.6.
2.3.7.
2.4.
2.4.1.

2.4.2.

109
109
110
110
111
111
112
114
116
116
117
118
130
132
132
133
133
137

3.1.
3.1.1.

The New Trade Debate and Its Implication to Vietnam …………………...
Vietnam’s New Membership of WTO ……………………………………

137

3.1.2.

3.1.3.
3.1.4
3.2.

New Politics of Trade and Vietnam ………………………………………
CDM and Vietnam ………………………………………………………..
ODA and Environment/Trade Issues for Vietnam…………………………
Application of Economic Theory - Implication of ITTO Mechanisms to
Vietnam - ………………………………………………………………….
Scenario 1 …………………………………………………………………
Scenario 2………………………………………………………………….
Analysis of results …………………………………………………………
Summary of Games ……………………………………………………….
Experiences in Other Countries for the comparison with Vietnam…………
Japan ………………………………………………………………………
South Korea ………………………………………………………….……
China ……………………………………………………………………...

138
139
141
142

3.2.1.
3.2.2.
3.2.3.
3.2.4.
3.3.
3.2.1.
3.2.2.

3.2.3.

137

144
151
156
157
160
160
160
160


3.2.4. Lessons from other countries ……………………………………………
Conclusion ……………………………………………………………………….

161

List of reference materials ………………………………………………………

168

162


LIST OF FIGURES, BOXES AND TABLES
Page
Chapter I: Economic Theories Related to Environmental Conservation

15

Figure 1.1.

Supply=Demand Relation for Normal Private Goods

18

Figure 1.2.

Supply=Demand Relation for Public Goods

18

Figure 1.3.

Total Cost and Total Revenue Relation (Private goods)

20

Figure 1.4.

Marginal Cost and Average Revenue Relation (Private Goods)

Figure 1.5.

Total Cost and Total Revenue Relation (Public Goods)

21

Figure 1.6.

Marginal Cost and Average Revenue Relation (Public Goods)

21

Figure 1.7.

Natural Resource Budget Line and Sustainable Level

23

Box 1.1.

International Agreement and Game Theory

29

Figure 1.8.

Contribution and Depletion Relation

30

Figure 1.9.

Export Quota Allocation and Market

34

Figure 1.10.

Elasticity of Substitution (High Elasticity)

35

Figure 1.11.

Elasticity of Substitution (Low Elasticity)

35

Figure 1.12.

Current and Possible Future Budget Lines

37

Figure 1.13.

Long-term Tropical Forests Depletion Perspectives

38

Figure 1.14.

The case sustainable level is set at 2000

41

Figure 1.15.

The case sustainable level is much higher than present level

41

Figure 1.16.

Contribution and Sustainable Level of Resource Depletion
(Case 1)
Contribution and Sustainable Level of Resource Depletion
(Case 2)
Contribution and Sustainable Level of Resource Depletion
(Case 3)
Relation between Fund and Global Environmental Value
/ Scenario 1 (Gv = 2*(Cp + Pp) - 1500)
Contribution to the Fund and Game Theory /Scenario 1 (Gv =
2(Cp + Pp) - 1500)

44

Figure 1.17.
Figure 1.18.
Figure 1.19.
Box 1.2.

20

44
45

48
49


Box 1.3.

Same environmental value for both consumers and producers

53

Box 1.4.

No environmental value for producers

54

Box 1.5.

Half environmental value for producers

55

Box 1.6.

57

Box 1.7.

Contribution to the fund and Game Theory /Scenario 1b (Gv =
2(Cp + Pp) - 1500)&(Pv = Gv - Pp + Cp)

Same environmental value for both consumers and producers

Box 1.8.

No environmental value for producers

60

Box 1.9.

Half environmental value for producers

61

Figure 1.20.

63

Figure 1.21.

Contribution and Sustainable Level of Depletion (Case 4: Both
consumers and producers share responsibility)
Budget Line of the Fund

Figure 1.22.

Budget Line Shift by Producers' Efforts

66

Figure 1.23.

68

Box 1.11.

Relation between contribution and Global Environmental
Value /Scenario 2 (Gv = Cp + Pp)
Relation between contribution and Global Environmental
Value /Scenario 3 (Gv = Cp + Pp -1500)
Contribution to the fund and Game Theory /Scenario 2 (Gv =
Cp + Pp)
Same environmental value for both consumers and producers

Box 1.12.

No environmental value for producers

73

Box 1.13.

Half environmental value for producers

74

Box 1.14.

75

Box 1.15.

Contribution to the fund and Game Theory /Scenario 3 (Gv =
Cp + Pp -1500)
Same environmental value for both consumers and producers

Box 1.16.

No environmental value for producers

77

Box 1.17.

Half environmental value for producers

78

Box 1.18.

80

Box 1.19.

Contribution to the fund and Game Theory /Scenario 2b (Gv =
Cp + Pp)&(Pv = Gv -Pp + Cp)
Same environmental value for both consumers and producers

Box 1.20.

No environmental value for producers

82

Box 1.21.

Half environmental value for producers

83

Figure 1.24.
Box 1.10.

59

66

69
71
72

76

81


Box 1.22.

84

Box 1.23.

Contribution to the fund and Game Theory /Scenario 3b (Gv =
Cp + Pp -1500)&(Pv = Gv - Pp + Cp)
Same environmental value for both consumers and producers

Box 1.24.

No environmental value for producers

86

Box 1.25.

Half environmental value for producers

87

Chapter II: Environmental Conservation and Trade ……………….

92

Table 2.1.

Developing Countries' Share in Total Exports of Selected

99

Table 2.2.

Total forest area, related land area and population in 1995

120

Table 2.3.

Forest cover change for developing countries

123

Table 2.4.

Current and projected consumption of forest products
(1990-2010)
Natural forest and Net Plantations in developing countries

124

Forest cover state and change by ecological zone for tropical
countries
Chapter III: Issues Related to Vietnam ……………………………….

126

Table 2.5.
Table 2.6

85

125

132

Box 3.2.

Relation between the Bali Partnership Fund and Vietnam
Scenario 1 (GVv = Cp + Vp)
Contribution to the Bali Partnership Fund and Game Theory /
Scenario 1: Vietam (GVv = Cp + Vp)
Same environmental value for both Vietnam and consumers

Box 3.3.

No environmental value for Vietnam

149

Box 3.4.

Half environmental value for Vietnam

150

Box 3.5.

152

Box 3.6.

Contribution to the Bali Partnership Fund and Game Theory

/Scenario 2: Vietnam (GVv = Cp + Vp)&(Vv = GVv -Vp +
Cp)
Same environmental value for both Vietnam and consumers

Box 3.7.

No environmental value for Vietnam

154

Box 3.8.

No environmental value for Vietnam

155

Figure 3.1.
Box 3.1.

146
147
148

153


Abbreviations
AFTA

ASEAN Free Trade Area

APEC

Asia Pacific Economic Cooperation

ARF

ASEAN Regional Forum

ASEAN

Association of East Asian Nations

ASEM

Asia Europe Meeting

BTA

Bilateral Trade Agreement

CDM

Clean Development Mechanism

CEPT

Common Effective Preferential Tariff

COP

Conference of the Parties

CPR

Common Pool Resource

CPRGS

Comprehensive Poverty Reduction and Growth Strategy

DDA

Doha Development Agenda

DSB

Dispute Settlement Board

FAO

Food and Agriculture Organization

FCCC

Framework Convention on the Climate Change

FTA

Free Trade Agreement

FTAA

Free Trade Area of the Americas

GATS

General Agreement on Trade in Services

GATT

General Agreement on Tariffs and Trade

GEF

General Environmental Facilities

GHG

Green House Gas

ICO

International Coffee Organization

IMF

International Monetary Fund

IPCC

Inter-Governmental Panel on Climate Change

ITTA

International Tropical Timber Agreement

ITTO

International Tropical Timber Organization

MAI.

Multilateral Agreement on Investment

MDG

Millennium Development Goals

MEA

Multilateral Environment Agreement


MMT

Methylcyclopentadienyl Manganese Tricarbonyl

NAFTA

North American Free Trade Agreement

NGO

Non-Governmental Organization

ODA

Official Development Aid

OECD

Organization for Economic Cooperation and Development

PRSP

Poverty Reduction Strategy Paper

SOE

State Owned Enterprise

TED

Turtle Excluder Device

TPA

Trade Promotion Authority

UN

United Nations

UNCED

United Nations Conference on Environment and Development

UNDP

United Nations Development Programme

UNEP

United Nations Environmental Programme

USITC

United States International Trade Commission

WB

World Bank

WCED

World Commission on Environment and Development

WSSD

World Summit on Sustainable Development

WTO
WWF

Trade Organization
World Wildlife Fund


December 2007
INTRODUCTION
1. Necessity of the thesis topic
Reflecting the growing concerns of global community on rapid depletion of
tropical forests, and responding to their determinations stated in Rio Declaration of
1992, governments and people of the global community reinforced their commitments
to environmental sustainable society for the offspring of all human beings. Especially,
a number of new international agreements are created or renewed to include more
environmental conservation oriented clauses. Efforts being made under FCCC
(Framework Convention on the Climate Change) and ITTA (International Tropical
Timber Agreement) of 1994 are two of the examples. Organizations such as APEC
(Asia Pacific Economic Cooperation) or WTO (World Trade Organization) also
increased concerns on environmental conservation by way of reorganizing trade related
measures. It is therefore imperative to study how these international organizations
should achieve the sustainable development. Particularly, it is important to study the
relations between sustainable development and trade liberalization which these
organizations promote in order to increase the economic benefits of global community
including developing countries such as Vietnam.

2. General Information on Thesis Study
(1) Previous Studies

The mechanisms or arrangements adopted by member countries of
international agreements can be examined theoretically and scientifically by comparing
them with previous economic theories such as those stated below. In order to examine
these theories, mathematical analysis will be employed as a core tool of methodology.
Particularly, the paper will try to come up with possible mathematical solutions that are

-1-


workable even under so-called “prisoners dilemma” under game theories.
(a) Theories of Common Pool Resources
Since most of the environmental assets are common pool resources, the plight
of current tropical forests and each member country's decision making process may be
examined in accordance with theories of common pool resources or public goods.
(b) Theories of Collective Actions
Each member country's contribution to international organizations can be
affected by the amount to be contributed from other member countries. Hence, the
mechanisms adopted by international agreements can be examined by the theories of
collective actions.
(c) Other economic theories
Other economic theories relevant to environmental assets, such as theory of
monopolistic market, will also be introduced where necessary.
In order to verify the adaptability of these theories, an international issue and a
local issue will be examined. First, WTO agreements and the Doha Development
Agenda will be examined particularly in its relation with global environmental
movements. Secondly, the situation in Vietnam will be examined particularly in
relation with environmental conservation efforts in Vietnam in a global context.
There have been a number of studies which have led to the theories stated
above, thereby making this thesis possible. The following studies are just some of
such examples. „Governing the Commons‟ (Elinor Ostrom, 1990) and „Logic of

Collective Action‟ (Olson, 1965) are the two most important studies which provides
important theoretical basis of this thesis.
(a) Environment White Paper of Japan (Ministry of Environment, 2002)
There are a number of documents that raise the concern on the global
environmental crisis. This Environmental White Paper of Japan presents the facts
about the state of the global environmental assets and the global efforts being taken to

-2-


address these problems. This document, among many others, can be used as a
reference for us to know how the global community generally views the environmental
degradation as a significant threat to the global community. As a government
document, this book provides brief but very clear views on this point. In addition to
this Japanese official report, other official documents such as FAO Year Books, UNEP
Annual Reports or ITTO Official Reports also provide the general views on the plight
of the global environmental assets.
(b) Environmental Economics (B.C. Field, 1993)
This is a textbook widely used for the study of environmental economics. This
book provides basic environmental economic theories and covers every aspect of
environmental economic issues. This textbook is useful in exploring proper ways of
application of economic theories onto mechanisms adopted by international
agreements.
(c) Environmental Economics and Policy (Tietenberg, 1994)
This is another book on environmental economics. Although the contents and
structure of this book is more or less similar to the book by B.C. Field, this book helps
deepen and broaden the understanding on environmental economics. This textbook
presents important analysis on international environmental economic problems,
especially the sustainable development issues, which are used as the theoretical basis in
constructing theoretical approach in the proposed thesis.

(d) Governing the Commons (Elinor Ostrom, 1990)
This article by Ostrom provides an important key to a break-through in the
collective action problems. Traditional game theories indicate that the rational
behavior by individuals tend to result in the most undesirable outcome. This is
considered also true in international relations, especially when it comes to the allocation
of contribution. Ostrom suggested in this Article that the desirable result can be
achieved if proper communication is established prior to the games. This suggestion
would be explored in verifying that the proper discussion and negotiation under
international organizations can lead to a most desirable outcome for all or the majority

-3-


of their member countries.
(e) The Logic of Collective Action (Olson, 1965)
Olson first introduced the concept of "collective action problem" in this 1965
article. The inconsistency between individual and collective interests is explored in
detail in this article. Since the tropical timbers are considered as "global commons,"
this article provides theoretical background why the tropical forests face collective
action problem and are doomed to be over-exploited. Combined with other economic
theories of public good and common pool resources (CPRs), this article by Olson
constitutes one of the backbones of the theoretical approach in environmental
economics.
(f) Price Theory and Applications (Hirshleifer, 1992)
This is another textbook widely used for micro-economics. This basic
textbook on basic economic theories presents very detailed explanation about market
principles. This book supports theoretical approaches employed in this article by way
of supplementing the environmental economic theories contained in the book by B.C.
Field and others. Especially, this textbook provides useful theoretical analysis on
characteristics of public goods.

(g) Ecology (P. Stiling, 1996)
This book introduces and explains the basic ecological functions. Although
ecological issues are not directly related to this article because it is basically focusing on
the international economic issues, basic understanding on ecology is needed to realize
the issues related to the global environmental assets.
(h) WTO, after Seattle (Jefferey Schott, 2001)
WTO negotiations became paralyzed at its 3rd Ministerial Meeting held in
Seattle in 1999. The negotiation to launch a new round was thwarted mainly because
NGOs around the world objected the globalization of trade. These NGOs are mostly
environmental groups such as Green Peace and WWF which believe that trade
integration harm the global environment. This book by a well-know scholar from

-4-


Institute of International Economics of the United States illustrates how the WTO
negotiations are affected by environmental conservation movements.

(2) International Relations Related to Environmental Economic Issues
As stated above, there is a growing global concern on the issue of the
environmental conservation. There are many reasons for the concern. First of all,
there is a fear that some of the precious environmental assets such as tropical forests
may disappear totally in the future not very far from now if the depletion at the current
very rapid rate continues. Second, people on the earth are experiencing irregularity of
the world climate and its catastrophic effects on the earth, i.e., floods, droughts, loss of
low land areas, etc. These natural disasters are being caused by the global warming
and other serious degradation of global assets. In Vietnam, there has been an initial
notion of environmental hazard caused by industrialization. Deforestation is one of
the serious problems Vietnam is faced with.
Clearly, the global environmental conservation has become an urgent task that

the global community should address jointly. Particularly, the relation between trade
and environment has become a center of discussion for trade liberalization negotiations
during the past few years.

Hence, it is felt urgent by the world community to

reduce or stop depletion and degradation of the global environmental assets. Many
efforts are being made by individuals, governments, NGOs and international
organizations including Green Peace and WWF.

International organizations and

agreements are increasingly being designated to address this serious issue and can be
considered as the most effective mechanisms to handle issues related to the
conservation of environmental assets.
The main question here is how effectively international agreements can handle
this issue. Particularly, efforts being made under WTO framework are of significant
importance because the relations between trade and environment have become
inseparable. Vietnam is trying to be a member of WTO by the end of 2005 and the

-5-


implication of WTO agreements and the ongoing Doha Development Agenda
negotiations needs to be examined.
A detailed study on objectives of international agreements and their action
plans may reveal how they are designed to protect the global environment and local
environment in Vietnam.
Under DDA, 142 member countries decided to include “environment” as one
of the negotiation agenda to be concluded. EU and its member countries, particularly

France, very strongly requested that the environmental protections must clearly be
linked to the trade liberalization mechanism. On the other hand, most developing
countries opposed to even include it as a part of agenda at all.

As a result,

environmental issues were agreed to be integrated under the new round negation of
WTO but only partially. DDA is only mandated to discuss the implication of current
international environmental agreements to trade. However, the future development of
environmental negotiations still remains to be seen.
Further, it would be very useful to introduce some leading present economic
theories and analyze the international agreements in accordance with these theories.
By adopting theoretical approaches, the role and limits of international agreements in
the environmental conservation could become clear.
There is no doubt that the global environmental conservation is an urgent and
very important global issue today. A lot of efforts are being made by the United
Nations.

For example, UNCED of 1992 and its agenda 21 may be the most

well-known achievement made by the UN. Serious efforts are also being made by a
number of other international organizations, governments, NGOs, and individuals.
However, international agreements are in many cases established to serve this
purpose intentionally by member governments. Therefore, to conduct a research on
international organizations and their roles in global environmental conservation would
be a important task. The knowledge about the roles of international organization would
be a very important asset for those who are concerned about the global environmental

-6-

conservation.
Moreover, it is of significance to study the implication of international
agreements onto the environmental conservation in Vietnam, since Vietnam is rapidly
integrated into the global community as a new member of WTO.
There have been a number of studies related to the relations between trade and
environment especially in the context of WTO Doha Round Negotiations. There are
also a number of studies related to other international agreements such as FTAA and
US-Jordan FTA. One of the best studies probably the “WTO after Seattle” by Jeffery
Schott of which the review is stated below.
However, there has been no publication analyzing the impact of trade
agreements mathematically in terms of environmental conservation. This thesis is,
therefore, unique, original and very challenging in this aspect.

3 Objectives of the Study
Thus, the purpose of this thesis is to examine how International Agreements
envisage to contributing to conservation of the global environmental assets that are
diminishing rapidly at an increasing rate. In order to discuss this, first the general
objectives and mechanisms of international agreements need to be introduced. Then,
currently available economic theories need to be applied with the purpose to verify the
effective functions of international agreements in general in environmental conservation.
Such an examination would contribute to seeking the best policy alternatives to achieve
sustainable global development and local development in a country such as Vietnam.
It is of absolute importance that Vietnam is prepared for the possible
consequences of environmental degradation and responsibilities under international
agreements. This thesis will introduce some of the possible alternative paths that
Vietnam will need to take during its economic development process.

-7-

4. Scope of the Study
(1) Scope of the Study
As for the scope of the study, it is necessary to study the relation between WTO
and environmental issues. Environmental negotiation is included in the current Doha
Development Agenda (DDA) negotiations but to the minimum extent. The proposed
thesis will discuss how the environmental negotiations under DDA will affect the future
global trade. Secondly, as a supporting factual background to the DDA negotiations,
the efforts that have been made by the international community to conserve global
environmental assets need to be examined.
The most important element in the Vietnamese context in the proposed thesis
will be the Vietnam‟s accession to WTO which has taken effect as of January 11, 2007.
First, the thesis will discuss the current situation of the multilateral and bilateral
negotiations on Vietnam‟s possible accession to WTO. Secondly, the implication of
Vietnamese accession to WTO and its obligations related to environmental
conservation will be examined.
The detailed analysis of issues Vietnam is being faced with WTO accession,
such as SEO reform and intellectual property rights, are also discussed in the Chapter 3
of the Thesis.

(2) Limitation of the Study
However, there are a few limitations in writing the proposed thesis.
Functions of international agreements can be analyzed separately by different
economic theories. However, it will be impossible to verify the whole functions of the
agreements from pure economic theories. International organizations are in many
cases experimental and actual operating organizations. Just as the real economy can
not be fully explained by economic theories, economic theories will not be able to
explain the overall roles of international agreements completely.

-8-

Second, it will be very difficult to obtain all data and information which will be
useful for writing the proposed thesis. Especially, statistical data on the volume of
production, export, import, consumption, depletion and plantation, etc., may not be
accurate nor updated to be used as the basis of analysis. Further, evaluation or
judgment about the plight of environmental damages on the global environmental assets
should always be subject to bias in selecting such data. Needless to say, replies
obtained from interviews will also be subject to bias.
The relation between trade and environment is a new international issue.
Although significant amount of researches have been made during the past few years,
there seems to have been no researches on the impact of environmental negotiations of
WTO onto Vietnam. This is understandable since Vietnam is not a member of WTO
and Vietnam does not have serious environmental problems at this moment.
However, it is said to be almost certain that Vietnam will go through the
process of environmental degradation and the consideration and introduction of new
measures to address such domestic environmental issues. Vietnam has now become a
member of WTO. Vietnam now has to abide by all of the WTO agreements. The
future trade of Vietnam will have to take into consideration the environmental aspects
under WTO agreement.
This thesis, therefore, provides new elements for Vietnam with regard to its
implication of trade under WTO obligations. This may be the first attempt to analyze
the impact of Vietnam‟s WTO membership in terms of the relations between trade and
environment. It is hoped, therefore, that this thesis becomes a part of guidance for
Vietnam in adjusting its trade policies under WTO agreements.

5. Method of Study
The final conclusion of the proposed thesis will be whether the mechanisms of
international agreements are proved to be in line with economic theories. Further,
effectiveness of such mechanisms in environmental conservation will be examined by

-9-


applying Coase Theorem. In the absence of an absolute authority in the international
society that shall force the level of consumption of environmental resources, it should
be necessary to study if international organizations can regulate the policies of their
member countries.
In this thesis, the focus is set on the general mechanisms of international
agreements. This approach would make it clear how international agreements try to
achieve sustainable management of the global environmental assets. The mechanisms
and arrangements adopted by a number of international agreements must be studied
carefully in order to understand the effectiveness and impact of their projects in relation
with the global environmental conservation.
Second, the results obtained by the above studies are further examined with the
relevant economic theories which are introduced in the Chapter 1 of the thesis. By
applying economic theories, the roles and mechanisms of international agreements in
conservation of global environmental assets will become clearer.
Third, the Vietnamese context is examined. Vietnam has become a member
of WTO in January 2007 and its implication to environment needs to be assessed
properly.

Apart from trade implications, Vietnam will have to take the path of

balancing between industrialization and environmental degradation. Japan suffered
quite heavily from pollutions during the fast industrialization process during 60‟s and
70‟s. Such experience of Japan needs to be properly introduced to Vietnam whose
economy is experiencing a very fast economic growth.
The methodology of the study will mainly be the researches based on the
statistics and other public documents related the relation between environmental issues

and international agreements, especially on trade. Some of the evidences will be
derived from interviews and the diplomatic experiences of the author of the thesis.

6. New Contributions of the Study

- 10 -


(1) New findings related to theory
(a) A new economic equation to relate two levels of sustainable management of
economic resource
This thesis introduces a new concept of combining two types of sustainable
management of natural resources in a single economic equation and also under a single
diagram. It has been known already that there are a number of definitions on
sustainable development, and particularly, the following two types are often used as the
basic level of sustainable management. In this thesis, one is represented as S which
means the resource level where human beings and their economic activities are
sustained permanently by the consumption of resources. The other one is represented
as OS which means that, regardless the human sustainability, the resource itself is
completely renewable if consumption is under this original level of environmental
amenity.
The relation is established as:
C ≦ ΔOS*E + S therefore, E ≧ (C – S)/ΔOS1
This equation is innovative because it shows us the relation between S and OS in a
single diagram which would help us to identify the point of two possible sustainable
levels at the same time in a figure. Particularly, it is innovative that the renewal rate of
resource, i.e., ΔOS which represents the coefficient of the OS curve, is found to be a
significant factor to see the degree of divergence between the two levels of
sustainability. The Chapter 1.1 introduces a detailed analysis of this equation.
(b) Introduction of two enforcement factors as the background of games to see the

impact on the contribution trade-offs
The games under game theory normally end up with catastrophe because of
1

E stands for Environmental Amenity. Likewise, C for Consumption, OS for Original Sustainability, S for
Sustainable Level for human activities. ΔOS stands for marginal net consumption.

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„prisoners‟ dilemma.‟ Ostrom introduced a new concept to the game theory that the
introduction of a new factor represented as „e‟ for the enforcement of cooperation will
lead the game to a success. This thesis adopted the „e‟ as a governing condition for all
games to see the effect. This thesis also introduces a new factor represented as „a‟ for
the arbitration system. The games that are assumed to be supported by this factor in
the thesis are found to be more successful than normal cases.
It is truly innovative to introduce these two factors together in games, because
these two factors, i.e., „e‟ and „a,‟ respectively imply enforcement of penalties and the
enforcement of self-arranged arbitration system or dispute settlement mechanisms,
which should also guarantee the proper negotiation or consultation process and
maximum transparency of information.
(2) New findings related to the application of theory
The games played with the above mentioned two factors under the principles of
game theory turned out to be more successful than the cases without them. This
outcome rightly confirms that the policy dialogue with information transparency and
the proper system of arbitration or dispute settlement are crucially important for the
negotiation under international organizations. It is particularly innovative to note that
these two factors should be introduced together to make negotiations even more
successful.
(3) New findings as implication to Vietnam

As already stated above, Vietnam will face certain amount of pressure from
members of WTO to Vietnam‟s domestic environmental policy through trade measures.
It would be possible that Vietnam will be sanctioned by WTO if Vietnam does not
abide by the requests from other international environmental organizations such as
ITTO, because the relation between WTO and other environmental organizations are
now being negotiated under Doha Development Agenda
A number of games played in the thesis turned out to be failure for which
sanctions may be applied by the organization. This implies that Vietnam may also be

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sanctioned if the negotiation under international organizations fails.
Then what Vietnam should do? This thesis tries to provide an answer to this
question. As general game theory tells us, it is not realistic to think that there would
be a system for any games to become successful. Therefore, in some difficult cases,
sanctions may of course be unavoidable. This thesis, however, proves that the games
become more likely to succeed when the fund or contribution is directly transferred
from consuming member countries to Vietnam. Coase theorem holds a crucial key for
this to happen. In other words, for certain environmental natural resources which
Vietnam holds the complete property rights over the environmental quality of the
resources, such as tropical timbers, Vietnam would possibly request cash support from
international organizations even without paying any contribution to the fund. In order
for this path to be taken by Vietnam, Vietnam needs to identify how much other
countries see the value of the environmental amenity would be. If other countries or
the global community in general see it large enough, the game may become successful
and Vietnam would not be sanctioned even though Vietnam does not contribute to the
fund. The point is that Vietnam should obtain sufficient information about the
position of other counties and then negotiate for the possible fund transfer as a
compensation for not consuming or depleting certain resources which Vietnam holds

property rights.

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Chapter I
ECONOMIC THEORIES RELATED TO ENVIRONMENTAL
CONSERVATION

The environmental natural resources are not governed by the market principles.
Therefore, they are being depleted along with the development of global economy.
This thesis examines the economic mechanisms surrounding the environmental natural
resources and economic theories that are generally acknowledged as the basic tools for
the economic analysis of environmental conservation.

1.1. Theories of common pool resources
Environmental quality is essentially a public good. It is therefore imperative
to know the characteristics of public goods in order to understand environmental issues.
Public goods can be classified into a few more specific categories such as pure public
goods, congestive goods and common pool resources (CPRs).

CPRs are also

sometimes called open access goods or common property resources.

General

definition of public goods is that they are the goods that can be consumed by other
people even if they are already consumed by one person. This is distinctively different
from private goods that can not be consumed by another person if once consumed by

one person.

Examples of pure public goods are defense and radio broadcasting

services. If these services are once provided, everyone can enjoy the benefit. For
these services, quality of the services is not affected by the number of people who
receive the services. Examples of congestive goods are public roads and bridges.
These public goods are open to everyone but the number of people who can use the
goods is not infinite. The more people use the facilities, the more they become
congested.

Efficiency of the services will decrease as they become congested;

however, the amount of the goods is not affected. Examples of CPRs are clean air,

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water, ocean fisheries, forests, to mane only a few. Under the present legal system,
they are not generally considered as private goods. Therefore, access and exploitation
of these goods are free to everyone. They can be consumed as first comes first serves
basis. For these goods, as the number of people who consume these goods increase,
the amount of the goods themselves decrease and the service quality may deteriorate.
CPRs can be further classified into renewable and non-renewable resources. If the
rate of consumption is faster than the rate of renewal, the goods will be all consumed up
in the end.
Although CPRs can to some extent behave like private goods in accordance
with economic theories, theory analysis of public goods fits more in understanding the
characteristics of CPRs. Therefore, it is required to introduce hereby the theory of
public goods.

Common Pool Resources (CPRs) are those that are not exclusively controlled
by a single agent [Tietenberg, p.38]. The term "common-pool resource" also refers to
a natural or man-made resource system that is sufficiently large as to make it costly to
exclude potential beneficiaries from obtaining benefits form its use [Ostrom, p.30].
Access to a CPR can be limited to a single individual or firm or to multiple individuals
or teams of individuals who use the resource system at the same time.
It is necessary to understand how CPRs are treated in the market because this is
the starting point why environmental resources can not be left to the market forces for
their own conservation. Otherwise, no efforts would be needed by any international
organizations.
For normal private goods, the demand and supply function can be illustrated as shown
in the Figure 1.1. Here, the amount of supply is expected to grow as price of goods
increases. This is considered as a common characteristic of normal private goods.
However, for public goods, especially for CPRs, the amount of supply, accordingly the
price as well, is not affected by demand changes. As illustrated in the Figure 1.2, the
amount of increase in the case of public goods tends to be greater than normal private
goods as described in the Figure 1.1. Public goods are thus by definition free to be

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