Über die Autorin bzw. den Autor

Kevin P. Gallagher is a Research Associate at the Global Development and Environment Institute of the Fletcher School of Law and Diplomacy at Tufts University. He is also Assistant Professor of International Economics in the Department of International Relations, Boston University. He has written and edited numerous books and articles on the relationship between economic integration and sustainable development and has served as an advisor to international institutions, governments, and nongovernmental organizations.

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Free Trade and the Environment examines the impact economic integration has on the environment, using Mexico, which transformed itself from one of the most closed economies to one of the world's most open, as a case study. As new nations join the Free Trade Area of the Americas or the World Trade Organization, they are considering the path taken by Mexico nearly 20 years ago.
The author investigates two commonly held and opposing beliefs in the policy community about the impact of free trade on the environment. While some believe that free trade will raise incomes in developing countries, thus encouraging governments to protect the environment, others argue that free trade simply provides an incentive for heavily polluting industries to move to developing countries with lax environmental regulations. The author shows that for Mexico in fact neither position is correct, and concludes with suggestions for free trade policies that couple environmental benefits with economic integration.

Aus dem Klappentext

Free Trade and the Environment examines the impact economic integration has on the environment, using Mexico, which transformed itself from one of the most closed economies to one of the world's most open, as a case study. As new nations join the Free Trade Area of the Americas or the World Trade Organization, they are considering the path taken by Mexico nearly 20 years ago.
The author investigates two commonly held and opposing beliefs in the policy community about the impact of free trade on the environment. While some believe that free trade will raise incomes in developing countries, thus encouraging governments to protect the environment, others argue that free trade simply provides an incentive for heavily polluting industries to move to developing countries with lax environmental regulations. The author shows that for Mexico in fact neither position is correct, and concludes with suggestions for free trade policies that couple environmental benefits with economic integration.

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FREE TRADE AND THE ENVIRONMENT

Stanford University Press

Contents

Tables.................................................................................................viFigures................................................................................................viiAcknowledgments........................................................................................viii1 Mexico and the Trade and Environment Debates.........................................................12 Environmental Kuznets Curve for Mexico?..............................................................123 Is Mexico a Pollution Haven?.........................................................................254 A Change in Composition: The Case of Industrial Air Pollution I......................................345 Is Mexico a Pollution Halo? The Case of Industrial Air Pollution II..................................496 Harmonizing Up? The Development and Performance of Mexico's Environmental Policy.....................627 Bring the State Back In: Enabling National Environmental Policy......................................80Technical Appendix.....................................................................................94Bibliography...........................................................................................110

Chapter One

By autumn 1993, the U.S. government was steeped in heated negotiations over the establishment of the World Trade Organization (WTO), and in supplemental environmental accords to the North American Free Trade Agreement (NAFTA). The potential negative effect of new trade agreements on the environment was among the most contentious issues of these debates. Many environmentalists pointed to the Mexico-U.S. border (a heavily polluted area where U.S. firms have been allowed duty free imports for decades) as an example of what would happen to the rest of Mexico and other developing countries if the WTO and NAFTA came into effect.

As discussion became increasingly polarized, Scientific American asked two leading economists to set the record straight. The November 1993 issue of Scientific American became an instant classic that is now required reading in many college classrooms. The two experts were Jagdish Bhagwati (a prominent trade economist from Columbia University) and Herman Daly (a well-known environmental economist then working at the World Bank). The two authors were not in agreement. Bhagwati argued that agreements such as NAFTA would raise incomes in developing countries to a point where governments would begin to protect the environment. Daly argued that free trade would provide an incentive for heavily polluting industries in developed countries such as the United States to move their operations to developing countries where pollution control was more inexpensive and lax. Today, more than 10 years later, the trade and environment debates remain contentiously divided along the lines outlined by these two economists.

The economic transformation of Mexico, from a relatively closed, import-substituting economy before 1985, to a major trading nation today, offers the opportunity to empirically examine the extent to which authors Bhagwati and Daly were correct. Hence, the central research question for this book is: To what extent has economic integration affected levels of environmental degradation in Mexico? The time period under consideration for this analysis is 1985 to 1999. Mexico began integrating itself with the world economy in 1985, and, by 1999, it had become one of the more open economies in the world (1999 was also the most recent year of consistently available data).

Specifically, the analyses presented in this book test the Environmental Kuznets Curve hypothesis and the pollution haven hypothesis. Bhagwati argued the Kuznets curve logic, and Daly argued the pollution haven logic. A case study of criteria air pollutants in Mexican manufacturing examines what are called the scale, composition, and technique effects of economic integration. Manufacturing is examined for two reasons. First, although manufacturing emissions in Mexico form a significant share of total emissions, vehicular emissions have received the most attention. Second, newly available data on criteria air pollution in Mexican manufacturing is used throughout this study. Many studies of Mexico's environment examine either Mexico City or the U.S.-Mexico border region. This study represents the first comprehensive work to examine the Mexican economy as a whole.

To date, the data does not confirm either Bhagwati or Daly's predictions. Despite modestly rising incomes, many environmental problems worsened significantly when Mexico integrated with the world economy. The environment, however, has not worsened due to a mass migration of heavily polluting firms from the United States to Mexico. The percentage of dirty industry in the Mexican economy actually declined. What caused increased levels of environmental degradation was the lack of adequate attention by the government of Mexico, and to a certain extent the United States, to correct the market failures related to environment that arose as a result of the integration process. Such degradation has come at great cost for Mexico. According to the Mexican government, the economic costs of environmental degradation during this period averaged 10 percent of gross domestic product (GDP) per annum. That figure stands in stark contrast to the annual rise in economic growth, which was only 2.6 percent.

This study underscores the importance of making environmental protection part and parcel of the economic integration process. Developing country governments need not fear that linking environmental protection to trade liberalization will hurt their prospects for economic growth. The fact that Mexico did not serve as a depository for heavily polluting firms from the United States suggests that the costs of compliance with environmental protection are not large enough to affect plant location decisions for the majority of firms. It appears that, if developing countries erect the appropriate environmental standards, they will not scare away foreign investment during the process. Moreover, this study suggests that when firms in developed countries argue that a new or existing environmental regulations may cause them to move overseas they may be bluffing. Thus, there is no reason why environmental standards can't improve in developed countries as well.

This chapter introduces the trade and environment debate and the theoretical lenses through which economists and other analysts have begun to examine it. It also provides an outline of the argument that will be advanced later in the book, as well as a summary of the rest of the book and its findings.

Theoretical Approaches to Trade and Environment

In recent decades, the world economy has undergone an unprecedented level of integration. Since the mid-1980s, the value of world trade has more than quadrupled and the value of foreign investment has increased by a factor of 15 (UNCTAD 2002). These flows have been facilitated by a proliferation of global, regional, and bilateral trade and investment agreements. The 1990s alone ushered a new round of global trade negotiations under the General Agreement on Tariffs and Trade (GATT) that resulted in...