Green Trade

Article excerpt

Economic Integration meets the Environment

Only months after the failure of the WTO Ministerial Conference Seattle, few topics appear to be more important than the relationship between international trade and the environment. With international trade increasingly revolving around large economic blocs such as NAIFTA and the EU, the relationship between the environment and economic integration in a broad sense, including all forms of regional trade liberalization, has become a focal point of interest. At the same time, few issues are as complex and multifaceted as this one. Does economic integration cause environmental deterioration? Does free trade really induce a downward competition of environmental standards?

The considerable quantity of literature dealing with this issue tends to adopt one of two traditional approaches. The first type of literature offers a political approach to environmental policy, investigating to what extent environmental policy can be shaped and abused by interest groups for protectionist purposes. It is worth emphasizing that, unlike environmental economics, which argues about what should be an optimal environmental policy from the perspective of economic efficiency, this segment of the literature adopts a public choice perspective. For that reason, it provides illuminating insights into the origins of diverging environmental policies. It also explains why interest groups are so committed to influencing environmental policies in spite of the fact that at the macroeconomic level neither empirical analyses nor model-based predictions show a clear impact of environmental policies on trade flows or direct investment choices.

A second body of literature analyzes the consequences of trade on the environment through changes in production and consumption patterns as well as through the impact of trade on national economic growth rates in general. Environmental policy in these analyses is viewed as a given. From this perspective, economic integration can, in some cases, benefit the environment. Trade liberalization may, for instance, reduce market failures, which are responsible for inefficient allocation of scarce resources and, therefore, for wasting environmental resources. Trade liberalization can also facilitate the diffusion of "greener" technologies. In other cases, economic liberalization can trigger a reaction to environmental dumping" through the systematic exploitation of comparative advantages based not on an intrinsically higher efficiency of the economic system, but rather on the externalization of environmental costs allowed by current environmental regulations.

Although independently helpful, these two approaches can be usefully integrated. Rolf Bommer's work, Economic Integration and the Environment: A Political-Economic Perspective, is one of very few books that offer a bridge between these approaches. For the author, the missing link is found in the answer to the question: how does trade liberalization trigger a reformulation of national environmental policies? To give an answer, the author looks at both the consequences of trade liberalization on the environment, and at how the environmental policy-making process reacts to the environmental consequences of trade liberalization.

Bommer's approach constitutes an attempt to combine the two traditional bodies of literature in order to investigate the effect of economic integration on environmental policymaking. This study explains how economic integration affects the stakes of the interest groups that, in turn, influence environmental policy. Because environmental policies are still mainly national and also somewhat flexible, unlike trade policies that are multilateral (WTO) or regional (NAFTA) and more stable, this book considers economic integration policies as given and focuses on how environmental policy is changed in the process of economic integration. …


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