Environmental Regulation and International Competitiveness

Article excerpt

CONTENTS

I. INTRODUCTION: THE CONTEMPORARY DEBATE OVER TRADE,

   ENVIRONMENTAL MEASURES, AND COMPETITIVENESS                             2041
   A. Product Regulation                                                   2043
   B. Process Regulation                                                   2044
   C. The Policy Debate in the United States                               2045

II. ENVIRONMENTAL PROCESS REGULATION, LIABILITY RULES, AND

   COMPETITIVENESS: A CONCEPTUAL ANALYSIS                                  2051
   A. Explaining Differences in Environmental Standards Among Nations      2052
      1. Differing Assimilative Capacities                                 2052
      2. Political Failure                                                 2054
      3. Externalities                                                     2054

B. Effects of Differing National Environmental Requirements

      on Competitiveness                                                   2056
   C. Desirability of International Competition in Assimilative Capacity   2057

III. PROCESS REGULATION AND INTERNATIONAL COMPETITIVENESS:

EMPIRICAL STUDIES 2061

A. Inherent Difficulties in Measuring the Costs of Environmental

      Regulations and Liability Rules                                      2062
      1. The Invisible Costs of Investments and Innovations Forgone        2063
      2. The Benefits of Environmental Regulation                          2065

3. The Indirect Effects of Industry Regulation on the Economy

         as a Whole                                                        2066
   B. Special Problems in Comparative Studies                              2067
      1. Obsolescence of Data                                              2068
      2. Different Regulatory and Enforcement Systems                      2068
      3. Industries Exceeding Minimum Standards                            2070
   C. Review of the Empirical Studies                                      2071
      1. Productivity Studies                                              2072
      2. Trade Studies                                                     2074
      3. Locational Studies                                                2077
      4. "The Race to the Top"                                             2079
      5. Long-run Impact on Innovation and Investment                      2082
IV. EVALUATION                                                             2084

A. The Competitiveness Impacts of National Differences in

Environmental Regulation and Liability Rules 2084

B. Reexamining U. S. Environmental Priorities and the Means for

      Achieving Them                                                       2086
      1. Environmental Contracting                                         2090
      2. Market-based Incentives for Environmental Protection              2093
   C. International Harmonization of Environmental Standards               2097
      1. Justifications for Harmonization                                  2097
      2. Precedents for International Harmonization                        2100

3. Competitiveness Concerns as Impediments to

         International Agreement                                           2102
      4. The Use of Economic Incentives in International Harmonization     2104
V. CONCLUSION: COMPETITIVENESS AS A POLITICAL HEURISTIC                    2105

The world is simultaneously facing increasing economic interdependency and intensified demands for protecting the environment. The June 1992 United Nations Conference on Environment and Development (UNCED) in Rio(1) has stimulated awareness of the global character of many environmental problems and the impact of environmental regulation on economic growth. …