The Theme and Thesis

The central theme of this book is the meshing of economic and environmental systems in an international context. Broadly speaking, the systems interact at two levels. The first is the interaction between international trade and investment and the environment, and the second is transnational pollution and the management of international environmental resources. The trade-environment nexus raises a number of interesting questions. How do trade and foreign investment affect environmental quality? What are “pollution havens”? Do the rules of a liberal trade system as exemplified by the General Agreement Tariffs Trade/World Trade Organization support or undermine environmental protection? Are environmental regulations used as covert trade barriers? Is comparative advantage determined by environmental resource endowments? Should poor countries specialize in producing “dirty” products?

Transnational pollution and the protection of international environmental resources such as a biological diversity and global climate raise equally interesting questions. What is the economic explanation for transnational pollution, and how can international environmental resources be protected? Who should pay? How can international environmental agreements be reached when environmental values, attitudes toward risk, and abatement cost burdens differ greatly, and nations assert sovereign rights? Are trade sanctions useful tools to prevent “free riders” and to enforce management of international resources? What are the connections between trade liberalization, international environmental agreements, and the attractive but vague concept of sustainable development? Is liberal trade consistent with sustainable development?