43329
Environmental Protection
and Free Trade: Are They
Mutually Exclusive?
ALISON BUTLER
In this essay, Alison Butler surveys the complex relationship between
environmental protection and trade. Beginning with an economic
analysis of pollution and environmental protection, Butler identifies
the primary effects of environmental regulation on international
trade. Environmental regulation typically reduces the supply of a
controlled good in a regulated country; therefore, producers in
other states increase production of that good and export it to the
regulated state. Whether such a shift in production and trade will
improve welfare, Butler argues, depends on national preferences
for environmental quality. The selection concludes by examining
transboundary pollution issues and current international regulations
on the environment and trade.Having to compete in the United States in a totally free market
atmosphere with companies and countries who have yet to
develop such environmental standards is inherently unfair. It
puts us into a game where the unevenness of the rules almost
assures that we cannot win or even hold our own.—James E.Hermesdorf, Testimony to Senate
Finance Committee on Trade and the
Environment, October 25, 1991Comments like the one cited above are being heard with increasing frequency. In
fact, protecting the environment has always had implications for international trade.
In 1906, for example, the United States barred the importation of insects that
could harm crops or forests. Similarly, the Alaska Fisheries Act of 1926 established
federal regulation of nets and other fishing gear and made it illegal to import
salmon from waters outside U.S. jurisdiction that violated these regulations. More
recently, a U.S. law restricting the method of harvesting tuna to protect dolphins
has been the subject of a trade dispute between the United States and Mexico.