Über die Autorin bzw. den Autor

Brian R. Copeland and M. Scott Taylor have coauthored numerous articles on trade and the environment in a variety of prominent journals. Copeland is Professor of Economics at the University of British Columbia. Taylor is Canada Research Chair in International, Energy, and Environmental Economics at the University of Calgary and a Research Associate at the National Bureau of Economic Research.

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"This well-written book goes right to the jugular, presenting an integrated, coherent view of the 'trade and environment' issue. The authors, who are well known in the field, are right in not taking sides other than when opinions flow from logically consistent argument."--James Cassing, University of Pittsburgh

"This book provides a unified presentation of important themes relating to international trade and the environment. There is no team better qualified to write such a book, and there are no close substitutes to this book. Copeland and Taylor provide economic intuition where possible, and their mathematical derivations are detailed and easy to follow."--Larry Karp, University of California, Berkeley

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Trade and the Environment

Princeton University Press

Chapter One

1.1 Globalization and the Trade versus Environment Debate

"It was the best of times, it was the worst of times." This line, written by Charles Dickens over 100 years ago, captures the present-day divide between supporters and critics of globalization. During the 1990s, North America and much of Europe enjoyed its longest peacetime expansion, unemployment rates hit historic lows, and real income growth in much of the developing world soared. To many these are the fruits of globalization. But this same decade saw little progress in addressing climate change, a decline in fish and tropical forest stocks, and by some measures, rising inequality in the world distribution of income. To many others, these are its costs.

Debates over "globalization" have been going on for some time. But nowhere has the divide between the two views of globalization been more apparent than in recent discussions concerning trade liberalization and the environment.

For the last ten years environmentalists and the trade policy community have squared off over the environmental consequences of liberalized trade. This debate was fueled by negotiations over the North American Free Trade Agreement and the Uruguay round of General Agreement on Tariffs and Trade (GATT) negotiations, both of which occurred at a time when concerns over global warming, species extinction, and industrial pollution were rising. The debate intensified with the creation of the World Trade Organization (WTO) and proposals for future rounds of trade negotiations.

Trade negotiators saw the WTO as a step forward because of its improved dispute settlement procedures and because it closed loopholes in previous trade agreements. Environmentalists, however, were disturbed by the intrusion of trade agreements into what many thought were purely domestic matters. Perhaps not surprisingly, then, an attempt to initiate a new round of multilateral trade negotiations in Seattle became a flashpoint for growing unrest with globalization and efforts at further trade liberalization.

The purpose of this book is to study the interaction between international trade and the environment using both economic theory and empirical analysis. Our objective is to move the discussion forward by developing useful theory and devising methods to help in the empirical estimation of key magnitudes. We hope to enlist readers in further discussion and evaluation of trade's environmental effects, and this book is designed to equip them with the tools for doing so. In the end, differences of opinion will of course remain because the effects of international trade on the environment are still not fully understood. But we hope to give researchers and policymakers a common language and framework within which to discuss, debate, and continue their investigations.

1.2 Two Questions and a Preview of Our Answers

Throughout the book, we focus on two key channels through which trade can affect the environment. The first is via its effects on the level, or scale, of economic activity. If trade spurs economic activity, then the pure income-generating effects of trade may be harmful to the environment. The second channel is via a composition effect-a change in the mix of economic activity in countries, caused by trade. Many environmentalists are concerned that trade may lead to a shifting of polluting industry from rich to poor countries, and this global composition effect may also raise world pollution.

As we will see, both of these channels are more complex than these simple arguments suggest, and this leads to the two key questions that unify the book:

How does the increase in economic activity induced by international trade affect the environment?

Many in the "deep green" environmental movement believe unfettered access to world markets is necessarily harmful to the environment. While arguments differ in the details, the primary objection is that international trade leads to a greater scale of economic activity-be it transportation services, more production of goods and services, or more consumption-and that economic activity per se harms the environment. In this view, if international trade stimulates economic activity and if this activity is inherently environmentally damaging, then so too is international trade.

This concern forces us to think about the link between economic activity and environmental quality more generally and not just with regard to international trade. It leads us to define a measure of the scale of economic activity and to then link this measure to changes in the economy brought about by trade liberalization. But since any change in the scale of economic activity also affects incomes, we must also take into account the impact of income gains on environmental regulation.

If higher real incomes generate a greater ability and willingness to implement and enforce environmental regulations, then the logical chain linking trade liberalization to environmental destruction is broken. A trade liberalization that raises the scale of economic activity will then also lower the dirtiness of production techniques, and its full environmental impact can only be resolved through careful empirical investigation.

We address this first question by using our theoretical framework to separate the impact of economic growth on the environment from that caused by trade liberalization. We show that the relative strength of scale versus technique effects depends on how government policy is formed and how quickly it changes in response to new conditions. We also set out the theoretical conditions under which either the scale or the technique effect is stronger. But since theory alone cannot determine the answers to our questions, we also present empirical work undertaken using a large crosscountry data set on measured sulfur dioxide concentrations in over 100 major cities in the world.

By isolating the pure scale and technique effects of trade, we estimate that a trade liberalization that raises the scale of economic activity by 1% raises pollution concentrations by 0.25 to 0.5% via the scale effect, but the accompanying increase in incomes per capita drives concentrations down by 1.25-1.5% via a technique effect. These estimates imply a strong policy response to trade-inspired income gains. As we show, they also imply that economic growth created by neutral technological progress will both raise real incomes and improve environmental quality, but economic growth fueled by capital accumulation alone will worsen the environment.

Our estimates and analysis are important in establishing that we need to identify the source of income gains before we predict its environmental consequences. For example, neutral technological progress favors no industry, and we find that it improves environmental quality through its role in raising incomes and tightening techniques of production. And while capital accumulation raises both incomes and scale, it favors the production of dirty, capital-intensive processes. Hence capital accumulation creates an additional effect leading to a worsened environment. Trade liberalization can be environmentally friendly since it brings income gains and will lead some countries to specialize in relatively...