Introduction

For the past twenty-five years, the world has been moving towards a free trade regime. At the same time the concern for the impact of free trade on natural resources is increasing. There is debate among the environmentalists and the economists on the impact of trade on welfare and biodiversity (see Chapter 18 of this volume). Environmentalists ‘worry that trade will expand the scope of market failures, put added strain on the environment and lead to degradation of natural resource stocks in the long run’ (Karp et al. 2001, p. 617), which in turn will decrease the welfare of both import and export countries. Many economists argue, however, that free trade will improve social welfare and rectify environmental externalities provided markets function efficiently, property rights over biodiversity resources are well defined and non-market values of natural resources are accounted for in the production process.

The fact that most of the world's biodiversity-rich land lies in the populated and poor South makes the situation even worse. The biodiversity-rich South is already overburdened to meet the demand of its own population for biodiversity-derived goods (such as agricultural products, timber and non-timber forest products), while free trade, it is argued, adds further pressure to overuse and overexploit biodiversity resources.

Yet as incomes grow in Northern countries, their consumers are displaying an increasingly stronger preference for so-called ‘green products’.