Strategic Environmental Policy and International Trade

Trade liberalization and transboundary pollution

“…The transboundary nature of many pollutants will make it even less likely that globally e¢ cient environmental policies are pursued by individual countries acting non-cooperatively. A growing body of literature has examined these concerns (see, for examples, Krutilla, 1991;Barrett, 1994;Kennedy, 1994;Antweiler, et al, 2001;Copeland and Taylor, 2003).While identifying situations where countries may strategically weaken their environmental regulations in order to capture additional gains from trade, the literature has also pointed out other situations where trade can improve environmental quality. The latter may occur, for instance, as a consequence of higher demand for environmental quality that emerges as national income grows with international trade.…”

Is there an environmental benefit to being an exporter? Evidence from firm-level data

“…With this in mind, most of the attention has concentrated on foreign direct investment (FDI), plant location, and multinationals' impact on the overall level of environmental standards and pollution. However, more recent theoretic finds the effect is not as straightforward when environmental policy is endogenised (Copeland and Taylor (1994) and Copeland and Taylor (1995)), pollution is local (Markusen et al (1995)), factor endowments are taken into consideration (Copeland and Taylor (1997) and Antweiler et al (2001)), or when governments have other strategic considerations (Barrett (1994)). The empirical evidence has likewise cast doubt on the pollution haven hypothesis.…”

The role of MFN under asymmetries in environmental standards

“…Challenged by the European Community as discriminatory, this policy was upheld under article XX(g) of the GATT (Fischer et al, 2003). 1 Presently, environmental standards di¤er substantially across countries. Producers in countries with stricter environmental standards have worried about the impact of those standards on their competitiveness in world markets whereas governments and …rms in countries with less strict standards have expressed concern about new barriers being erected against their exports.…”

“…If trade policy is to be used, should the instruments be designed to explicitly include environmental concerns? If so, should countries with di¤erent standards be treated in a symmetric or dis- 1 Article XX of the GATT includes important environmental-related provisions that override other obligations of the GATT, including potentially MFN. See the key measures in paragraphs (b) and (g).…”