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Trade and Environment

Theory and Policy in the Context of EU Enlargement and Economic Transition

Edited by John W. Maxwell and Rafael Reuveny

The debate about how best to manage the interplay between trade, industrialization and the impacts of both on the global environment continues to rage, particularly in the context of the introduction and ratification of the Kyoto Protocol. This book deals with a number of important issues surrounding the debate about trade and the environment, but places particular emphasis on the process of EU enlargement.
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Chapter 8: Strategic Environmental Policies with Foreign Direct Investment: Implications of European Enlargement

M. Ozgur Kayalica and Sajal Lahiri


* M. Özgür Kayalica and Sajal Lahiri 1 INTRODUCTION The European Union (EU) is one of the most successful economic unions. It has, however, changed substantially both in terms of its scope and membership. It started as an economic community after the Treaty of Rome in 1957 with six founding members: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. It has undergone four successive enlargements with Denmark, Ireland and the United Kingdom joining in 1973, Greece in 1981, Portugal and Spain in 1986, and Austria, Finland and Sweden in 1995. Currently, negotiations are under way with thirteen other countries – most of them from Central and Eastern Europe – for possible accession in the near future. The EU is no longer just a free trade area; it is involved in coordinating policies among its members on a wide range of issues. Environmental policies are one of these issues. The enlargement of the EU, at the current stage of its development, poses a particular challenge as the new members are likely to be significantly more heterogeneous than the existing ones. The environment may be one of the most challenging areas in the new round of enlargement. The differences between environmental standards in Austria, Finland and Sweden, on one hand, and the 12 existing members at the time of accession of the former three, on the other, are much narrower than between the existing 15 member countries and the new potential entrant countries from the Central and Eastern European countries. Furthermore, substantial...

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