Edited by William A. Kerr and James D. Gaisford
Chapter 40: Trade Agreements and Multilateral Environmental Agreements
Ken Belcher Introduction The impact of trade on the environment has become an increasingly important issue in recent years. While there is no conclusive evidence that trade in and of itself necessarily harms the environment, in fact some more recent empirical research indicates that freer trade may be good for the environment (for example Antweiler et al. 2001; Grossman and Krueger 1995). However, there is also a body of research that shows that the increased specialization of the economy, in response to trade opportunities, may be environmentally degrading if the expanding industry is more environmentally damaging, and that the increased scale of production in response to trade may result in greater usage of resources and increased waste emissions (for example Rock 1996). It should be noted that there is also evidence that trade may improve environmental conditions with specialization in environmentally improving or benign activities and changing social preferences, with higher income, that increases the demand for environmental improvement and the justiﬁcation for environmental policies (Grossman and Krueger 1995). Interaction of economic growth and the environment was summarized by Arrow et al. (1995): Economic growth is not a panacea for environmental quality; indeed it is not even the main issue. What matters is the content of growth – the composition of inputs and outputs. This content is determined by, among other things, the economic institutions within which human activities are conducted. These institutions need to be designed so that they provide the right incentives for protecting the resilience of ecological...
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