One of the standard- for some economists, the deepest and most beautiful-results of international trade is that free trade will benefit all participants. That is why trade liberalization is considered to be a very important step towards development by many economists and politicians. Nevertheless, as indicated by Corden (1974), “Theory does not’ say’ that’ free trade is best’. It says that given certain assumptions, it is’ best’.”As environmental problems were not a big concern at the time when Samuelson’s gains from trade arguments were introduced (see, for example, Samuelson 1962), one such (implicit) assumption was that the environmental impact of trade liberalization policies could be neglected. With the recent emergence of environmental consciousness, the gains from trade argument is being questioned deeply from an environmental perspective by taking the environmental impact of freer trade into consideration. As Dean (1992) puts it, at the center of debate is whether or not the trade reforms will lead to depletion of non-renewable resources and increased environmental degradation, i.e. a type of development which can not be sustained. Thus, it is essential to identify the environmental consequences of trade liberalization. This is a quite demanding task.
KeywordsEnvironmental Policy General Equilibrium Free Trade Environmental Degradation Trade Liberalization
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