Market Access, Competitiveness, and Harmonization: Environmental Protection in Regional Trade Agreements

Abstract

This paper seeks to examine the relationship between trade liberalization and environmental protection with an eye toward alleviating conflicts between these important policy goals and making them more mutually reinforcing, especially in the context of regional trade agreements. Part I spells out and categorizes the various concerns that the parallel pursuit of trade liberalization and environmental protection has raised. Part II suggests a taxonomy of the responses that can be used to address the concerns outlined in Part I. The nature and characteristics of these tools and strategies vary considerably, consistent with the diverse set of trade/environment tensions to which they respond. Such tools range from a laissez-faire approach to differences in environmental standards among jurisdictions in a free trade regime to total harmonization of environmental regulations. Part III applies the theoretical framework outlined in Parts I and II to two regional trade agreements, the European Community (the EC) and the North American Free Trade Agreement (the NAFTA). It examines the extent to which the trade and environment concerns discussed in Part I have arisen in these two agreements, as well as the degree to which the responses discussed in Part II have been used to address these concerns. Part IV discusses the extent to which the experience of regional trade systems could be used to deal with trade and environment issues arising in the context of the World Trade Organization (the WTO). Finally, Part V offers some general conclusions.

Keywords: Trade, environmental protection, race to the bottom, harmonization, competitiveness, EU, NAFTA

JEL Classification: H41, H73, K32, F15