International Competitiveness and Environmental Regulations

Abstract

In the second part of our exposition on trade and the environment, we will try to identify the impact of environmental regulations on the competitiveness of the firms regulated. This is a concern both for the developed and developing countries. Developed countries fear that higher environmental regulations at home may cause a relocation of domestic industries to countries with lax environmental regulations. On the other hand, concerns of developing countries stem from the harmonization of environmental standards across countries (albeit differences in incomes) and/or trade bans on their exports because of environmental standards. This subject is a hot topic nowadays, and we will try to explore different aspects in the following chapters. Both the empirical and theoretical literature will be summarized.