Many externalities are international. For instance, so much water is diverted from the Colorado River (in the U.S.) that essentially no water flows into Mexico (where the river reaches the...

Many externalities are international. For instance, so much water is diverted from the Colorado River (in the U.S.) that essentially no water flows into Mexico (where the river reaches the sea). Give 3 further examples of international externalities. Why can international externalities not be solved by appropriate taxation and regulation? Briefly, what alternative methods are there for tackling international externalities?

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thanatassa | College Teacher | (Level 3) Educator Emeritus

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Many different externalities affect nations. Three examples would be:

Air pollution: Air pollution knows no boundaries. Canada has a continuing concern about U.S. air pollution, and especially the acid rain it causes, affecting Canadian forests.

Water Pollution and Invasive Species: The Great Lakes rest on the U.S./Canadian border. The growth of invasive species such as zebra mussels and water pollution affect both countries; thus any failure of one of the two countries to control and regulate water quality is an externality to the other country.

Oceans: Much of the earth's surface water is international. Thus everything from overfishing to ozone depletion to acidification affecting oceans is an externality to all coastal nations.

These international issues cannot be solved by taxation and regulation because one cannot tax and regulate other nations. Canada, for example, cannot enforce regulations on polluters located in the US or Japanese or Russian vessels fishing in international waters, and yet Canada is affected by all of these.

The main way of dealing with such externalities is through diplomacy, ranging from international organizations such as the World Trade Organization or the United Nations to bilateral discussions. Other possibilities are punitive trade sanctions, or, in the worst case scenario, war, such as the Trojan War which was fought, not for the romantic reasons Homer described, but probably over trading rights and access to the Black Sea.

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