The Impact of Domestic Environmental Policy on International Trade

Abstract

The trade impact of policy measures to protect the environment has been the subject of some concern and discussion ever since the late 1960s when most industrialized countries first began introducing serious pollution control programs. Some of these concerns were voiced at the 1972 United Nations Stockholm Conference on Development and Environment. At that time it was stated that (United Nations, 1972):

Environmental issues are going to exercise a growing influence on international economic relations. They are not only a formidable competitor for developed countries’ resources but they are also a factor which is, to an ever increasing degree, going to influence the pattern of world trade, the international locations of industry, the competitive position of different groups of countries, and their comparative costs of production. Environmental actions by developed countries are going to have a profound and manifold impact on the growth and external economic relations of developing countries.

This paper, though new, draws heavily on my previous paper, “The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test,” Kyklos, Vol. 43, No. 2, 1990. The views expressed in this paper are those of the author alone and should not be attributed to the U.S. Council on Environmental Quality.