Resource information
How to address the link between
environmental regulation and trade was an important part of
discussions at the World Trade Organization Ministerial in
Doha, Qatar in November 2001. Trade ministers agreed to
launch negotiations on trade and the environment,
specifically clarification of WTO rules. The authors address
an important part of the background context for deciding
whether or how to link trade agreements to the environment
from a developing country perspective. The authors ask
whether environmental regulations affect exports of
pollution-intensive or "dirty" goods in 24
countries between 1994 and 1998. Based on a
Heckscher-Ohlin-Vanek (HOV) model, net exports in five
pollution-intensive industries are regressed on factor
endowments and measures of environmental standards
(legislation in force). The results suggest that, if country
heterogeneity such as enforcement of environmental
regulations is controlled for, more stringent environmental
standards imply lower net exports of metal mining,
nonferrous metals, iron, and steel and chemicals. The
authors find find that a trade agreement on a common
environmental standard will cost a non-OECD country
substantially more than an OECD country. Developing
countries will, on average, reduce exports of the five
pollution-intensive products by 0.37 percent of GNP. This
represents 11 percent of annual exports of these products
from the 24 studied countries.
