The problem of choosing second-best trade policies is modified by including sector-specific policies as well as tariffs. Formulae for the optimal tariff and sector-specific subsidy are derived and used to study the design of optimal policy menus. The theory is applied to a computable general...

The authors demonstrate how coordinated trade and environmental policy can achieve efficiency and pollution mitigation gains superior to those obtained without such coordination. They show how trade and environment linkages give rise to complex second-best policy issues and derive optimal...