International Trade in Final
Goods: The Case of Perfect
As has been shown in the previous section, trade in toxic waste can be dealt
with in a one-sector model. The consideration of trade in final consumable
commodities requires a more general framework involving at least two goods.
The present chapter uses such a model. International trade is explained by differences in the environmental resource endowments of different countries. In a
first step, one may ask what determines the endowment of a country with environmental resources. This issue has already been addressed in Chapter 2, but
it will be reconsidered here using a, more formalized approach. Moreover, one
can look at the gains from trade: in which circumstances is it possible that increased environmental disruption offsets the traditional gains from trade?
Finally, the question may be addressed whether it makes sense to use environmental policy to achieve trade-related economic policy objectives and whether
this will result in a race to the bottom in the field of environmental regulation.
Is ecological dumping compatible with optimizing behaviour?Basically, two kinds of trade model frameworks in which these issues can be
addressed may be distinguished, the Ricardo-Viner model and the Heckscher-
|• ||In a Ricardo-Viner world some factors of production are sector-specific,
i.e. they cannot be moved from one sector to the other. This model has
been introduced into modern trade theory by Jones ( 1971) and Samuelson
( 1971) and it represents a short-run view of the economy. Structural
change, i.e. a relocation of these factors of production, takes place only in
the long run.|
|• ||In the Heckscher-Ohlin model, all factors are mobile across the sectors of
an economy. This model represents a long-run view since structural
change usually is a matter of decades. The classic references are Heckscher
( 1919), Ohlin ( 1933), Samuelson ( 1948, 1949), and Stolper and