Environmental Impacts of Trade

There would be no need to include environmental provisions in trade agreements if trade did not affect the environment. Although there is considerable variation in the perceived effects of trade on the environment, probably because the effects are complex and varied, there is no doubt that they do exist and that they are interrelated. Some see trade as an unmitigated disaster for the environment, while others see nothing but environmental benefits from trade and therefore view increased trade as a way to improve the environment. The reality lies somewhere in between, with both environmental benefits and damages emanating from international trade in goods and services. This topic has been the subject of a vast literature in economic, legal, environmental and other publications reporting on many studies — both theoretical and empirical. Anríquez (2002), Copeland and Taylor (2004), Huang and Labys (2001, 2002) and others have provided extensive reviews of this body of literature. This chapter will not repeat or update those efforts, but will focus on summarizing the potential impacts that trade and, hence, increased trade through free-trade agreements have for the environment, with a brief review of a few empirical studies that document some of those impacts. This is to provide a background for understanding the utilization of trade provisions in FTAs as well as the dialogue (arguments) about including trade provisions in FTAs that occurred in the 1990s, when the issue first arose, in addition to more recent FTAs, and that still continue.