Introduction

Abstract

The internationalization of the economy has accelerated in the 1980s and 1990s as growing international portfolio investment and foreign direct investment have reinforced the global interdependency of markets and locational competition. At the same time the economic opening up of China and eastern Europe has reinforced the globalization process. International trade and capital flows thus have gained importance, and so have environmental problems related to the growing output of tradables and rising transportation volumes. Moreover, there is an increasing role of multinational companies whose activities are partly related to trade growth, as about 1/3 of OECD trade is intra-company trade of MNCs. Increasing locational competition raises the problem of how environmental standards are evolving — is there a race to the bottom?