International Trade in Used Vehicles: The Environmental Consequences of NAFTA

Since trade restrictions were eliminated in 2005, Mexico has imported over 2.5 million used vehicles from the United States. 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 when a vehicle is traded from the United States to Mexico average vehicle emissions per mile tend to decrease in both countries. Overall, however, the evidence suggests that trade has increased total lifetime emissions, primarily because of low vehicle retirement rates in Mexico. (JEL F13, F14, L62, O13, O19, Q53, Q56)