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Trade and the Environment

Trade and the Environment: Theory and Evidence

Brian R. Copeland
M. Scott Taylor
Copyright Date: 2003
Edition: STU - Student edition
Pages: 304
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  • Book Info
    Trade and the Environment
    Book Description:

    Nowhere has the divide between advocates and critics of globalization been more striking than in debates over free trade and the environment. And yet the literature on the subject is high on rhetoric and low on results. This book is the first to systematically investigate the subject using both economic theory and empirical analysis. Brian Copeland and Scott Taylor establish a powerful theoretical framework for examining the impact of international trade on local pollution levels, and use it to offer a uniquely integrated treatment of the links between economic growth, liberalized trade, and the environment. The results will surprise many.

    The authors set out the two leading theories linking international trade to environmental outcomes, develop the empirical implications, and examine their validity using data on measured sulfur dioxide concentrations from over 100 cities worldwide during the period from 1971 to 1986.

    The empirical results are provocative. For an average country in the sample, free trade is good for the environment. There is little evidence that developing countries will specialize in pollution-intensive products with further trade. In fact, the results suggest just the opposite: free trade will shift pollution-intensive goods production from poor countries with lax regulation to rich countries with tight regulation, thereby lowering world pollution. The results also suggest that pollution declines amid economic growth fueled by economy-wide technological progress but rises when growth is fueled by capital accumulation alone.

    Lucidly argued and authoritatively written, this book will provide students and researchers of international trade and environmental economics a more reliable way of thinking about this contentious issue, and the methodological tools with which to do so.

    eISBN: 978-1-4008-5070-9
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-viii)
  4. 1 The Trade and Environment Debate
    (pp. 1-11)

    “It was the best of times, it was the worst of times.” This line, written by Charles Dickens over 100 years ago, captures the present-day divide between supporters and critics of globalization. During the 1990s, North America and much of Europe enjoyed its longest peacetime expansion, unemployment rates hit historic lows, and real income growth in much of the developing world soared. To many these are the fruits of globalization. But this same decade saw little progress in addressing climate change, a decline in fish and tropical forest stocks, and by some measures, rising inequality in the world distribution of...

  5. 2 Pollution in a Small Open Economy
    (pp. 12-66)

    This chapter develops the simple general equilibrium model we employ in the all subsequent chapters and provides a foundation for our analysis of trade and environmental policy. This is a “tools” chapter, and some readers may prefer to skim it and move on to the “issue” chapters that follow. But since many of the key assumptions we use throughout the book are laid out here, it is worthwhile spending some time on this chapter before proceeding.

    Because the book straddles two fields—environmental economics and international trade—we develop basic concepts from each field. At times it may seem that...

  6. 3 Is There an Environmental Kuznets Curve?
    (pp. 67-106)

    Some environmentalists have entered the debate over the benefits of trade liberalization by turning a classic argument for free trade on its head. Accepting that freer trade promotes growth in real incomes, they argue that this growth is ultimately futile because it will only lead to increased environmental degradation. This has led some skeptics, such as Herman Daly (1993), to question the wisdom of adopting a free trade regime. It has led others to call for a reform of international trading rules to ensure the environment is protected when trade is liberalized.

    Proponents of freer trade have countered by suggesting...

  7. 4 Trade Liberalization and Environmental Quality
    (pp. 107-141)

    Very few issues in recent years have been as hotly debated as the environmental consequences of trade liberalization. Environmentalists point to examples such as the Maquiladora zone in Mexico, where trade with the United States led to a heavy concentration of industry that contributed to a deterioration in local environmental quality. Trade has also been implicated in unsustainable harvest rates in tropical rainforests (because of trade in timber), threats to species such as elephants (because of trade in ivory), worsening air quality in parts of China (due to export-led growth), as well as numerous other environmental problems.

    In contrast, free...

  8. 5 Pollution Haven Models of International Trade
    (pp. 142-186)

    In 1986, the bargeKhian Sealeft Philadelphia carrying 15,000 tons of incinerator ash. After being thwarted by strict local environmental regulations and public hostility toward hazardous waste sites in the United States, a waste contractor sent the barge off to look for a country with weaker environmental regulations. The search was ultimately futile, as all attempts to unload the cargo in foreign ports (mainly in low-income countries) were rebuffed.¹ But for many environmentalists, this well-publicized odyssey was just one more example of how international trade allows a rich country to avoid responsibility for the environmental consequences of its high...

  9. 6 Factor Endowments, Policy Differences, and Pollution
    (pp. 187-214)

    The United States and Europe have some of the most stringent emission standards in the world, and yet both export some highly pollution-intensive manufactured goods. A narrow interpretation of this observation is that it directly contradicts the pollution haven hypothesis—after all, the pollution haven hypothesis predicts that the dirtiest industries should locate in countries with weak environmental regulations.¹ A more forgiving interpretation, and one we favor, is that the pollution haven hypothesis identifies one of many forces influencing the location of dirty industry around the world. The real question is whether pollution haven effects are strong relative to other...

  10. 7 Is Free Trade Good for the Environment? An Empirical Assessment
    (pp. 215-274)

    The previous five chapters set out a theoretical framework to examine the links between free trade, growth in income, and environmental outcomes. We asked how free trade affected pollution levels, and we asked whether different sources of income growth produced different environmental impacts. In many cases the answers we obtained were conditional. The impact of free trade on the environment depended quite importantly on the strength of policy responses. And even in a world where policy was flexible and responsive to trade-created income gains, the impact of free trade still depended on a country’s comparative advantage. Accordingly, we set out...

  11. 8 Summary and Conclusions
    (pp. 275-284)

    The objective of this book has been to study the effect of international trade on the environment. We developed a unified theoretical framework to help the reader gain an understanding of the major forces at work, and we showed how this framework could serve as the basis for empirical investigation. In this chapter, we review the major insights of the book and present suggestions for future research.

    A central message of this book is that allowing pollution policy to respond to the changes brought about by trade is essential to our understanding of how international trade affects the environment. While...

  12. References
    (pp. 285-290)
  13. Index
    (pp. 291-296)