Environment and Trade: A Review of Theory and Issues

This paper illustrates the major issues influencing interaction between environmental regulation and international trade by reviewing the empirical studies and theoretical results of the last 20 years. The second section of the paper discusses how environmental regulation distorts comparative advantage and specialization. The third part covers the impact of environmental regulation on the location of polluting industries. The fourth part covers transnational pollution and trade in wastes. The fifth section discusses major conflicts between trade policy and environmental policy. The final part addresses strategic environmental policy and international trade.