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CHAPTER 13 TRADE AND THE ENVIRONMENT Objectives of the Chapter Engagement in international trade has a number of implications for the environment. First, as trade changes the composition of what a country produces, it will also change how much pollution is created. Second, as trade increases an economy’s size, it tends to increase pollution, but as it raises per capita income, it tends to bring about pressure from residents to reduce pollution. (A clean environment is a “normal good” in economic terms.) At the same time, however, increasing global integration in commodities flows and factor flows means increasing integration insofar as one country’s economic decisions can affect the environment of other countries. Just as national borders complicate trade and finance, they also make addressing cross-border environmental problems difficult. Private activities that cause externalities are usually addressed within a country by either tax/subsidy policies or redefinition of property rights. Neither of these solutions is easy to apply when external effects drift from one country to another. In general, though, the fewer countries affected and/or the fewer goods involved, the easier it is to negotiate some international accord to correct environmental externalities. After reading Chapter 13 you should understand 1. the reasons why addressing environmental externalities is more difficult in the international sphere than within a single country. 2. how the level of pollution produced in a country varies with composition of output, size of economy, and per capita income of residents. 3. how and why traditional trade barriers rarely fit the specificity rule in correcting environmental problems. 4. the factors that lead to success or failure of environmental protection measures. 5. current debates on issues such as rain forest depletion, global warming, and extinction of animal life. Important Concepts Article XX: Lists general exceptions to the WTO’s main free-trade rules, including allowing trade barriers that are necessary to protect human, animal, or plant life, and that relate to the conservation of exhaustible natural resources. The WTO is wary of the use of Article XX by countries simply seeking protection for their import-competing industries. CITES:
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This note was uploaded on 02/18/2010 for the course ECON 343 taught by Professor Dblack during the Fall '09 term at University of Delaware.

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