International trade and environmental quality: a survey

International trade has been incorporating various aspects of environmental issues since 1970. The extent to which environmental problems might affect many facets of trade, or vice versa, has been the subject of considerable debate over these years. In this article we have attempted to establish som e of the links between international trade and environmental quality by per forming a comprehensive literature review. We discuss issues such as establ ishing direct and indirect effects of international trade on environmental quality, effects of trade on economic development, environmental quality, a nd energy and their relation with each other, and, finally, the role of gov ernments and international organizations in this context. Studies have so f ar revealed some linkages between trade and environment through conventiona l trade theory. However, interactions between international trade and types of pollution, their sink and assimilative capacity need to be analyzed usi ng a general equilibrium approach. Currently, very little knowledge and agr eement on the nature of interactions between trade theories, development pr ocess and environmental quality exist. Existing studies have shown that the structure of environmental regulations should be modified to reflect the e xistence of trade under imperfect competition. Therefore, further research on the interaction between new trade theory and environmental regulation is needed. Also, theoretical and quantitative analysis regarding the effects of environmental regulations on competitiveness and location decision is ne eded. The intensity and type of environmental measures vary across issues a nd countries. Therefore, harmonizing environmental measures creates an inef ficient atmosphere, and to assume that trade restrictions will either impro ve or reverse the environmental damages is a serious mistake. Given the dyn amic and intricate nature of the problem, trade and environment debate cont inues despite vast research and poses a challenge for researchers and polic y makers in the foreseeable future. (C) 2000 Elsevier Science B.V. All righ ts reserved.