Handbook of Sustainable Development
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Handbook of Sustainable Development

Second Edition

Edited by Giles Atkinson, Simon Dietz, Eric Neumayer and Matthew Agarwala

This timely and important Handbook takes stock of progress made in our understanding of what sustainable development actually is and how it can be measured and achieved.
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Chapter 25: International trade and sustainable development

Louis Dupuy and Matthew Agarwala


Studies of international trade and sustainability have long been viewed as separate exercises in the mainstream economic literature. The capital approach to sustainability suggests that any country purporting to be on a sustainable development path must maintain non-declining comprehensive wealth (Pearce and Atkinson, 1993; World Bank, 2011). Meanwhile international trade is concerned with the efficient allocation of goods and capital, contributing to sustainability via productivity improvements and increased welfare for a given level of production. Proponents of strong sustainability first criticized this position, arguing that international trade was not a ‘neutral’ mechanism to improve global efficiency. Daly (1996) argues the conclusions of neoclassical theory are flawed as capital is now mobile internationally. Faced with the potential of international trade, Hamilton and Clemens (1999) proposed an amendment to Genuine Savings (see Chapters 2 and 22) to include net foreign assets holdings. This amendment only partially addresses Daly’s original critique, as global trade linkages deeply affect patterns of resource extraction and consumption.

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