The Economics of International Trade and the Environment

American Journal of Agricultural Economics, Feb, 2003 by Henry Thompson

Batabyal, Amitrajeet A., and Hamid Beladi. The Economics of International Trade and the Environment. Boca Raton: Lewis Publishers, 2000,331 pp., $69.95.

This book is a collection of diverse articles dealing with topics on the interface of international and environmental economics. The field of environmental economics has developed independently and more recently than international economics. The fundamental motivation for environmental economics remains negative production externalities, relating neatly to the economics of production and trade.

Various contemporary policy issues hinge on both international and environmental economics. For instance, protectionists faced with free trade agreements ruling out tariffs and quotas are turning to "fair" trade arguments based on lax foreign environmental or labor standards. Other examples include trans-boundary pollution and international environmental agreements and compliance. Analyzing the desirability and impact of environmental regulations on trade and free trade agreements requires tools of both international and environmental economics.

As environmental clauses become increasingly important in free trade agreements, more international and environmental economists will be working in the overlapping area of trade and the environment. This collection of articles will prove useful to both groups of researchers. The collection offers a convenient way of becoming familiar with a variety of issues or to move into research in the area. The collected references alone are worth the price of the book for economists and students interested in the field.

There is a very wide range of theoretical models and empirical techniques presented in the twenty chapters or articles, the first eleven theoretical and the rest empirical or applied. For one meager reviewer, there is too much variety to competently describe in such a short space. I teach and do research in both international and resource economics with a focus on theory but with an eye on application. I found each of the articles to be good scholarship. The array of general equilibrium models interested me especially, but every reader will find articles on their own special interests.

The following is a list of authors, affiliations, chapter titles, and occasional remarks that should prove useful to those considering buying the book.

1. Amitrajeet Batabyal (Rochester Institute of Technology) and Hamid Beladi (University of Dayton): Introduction and Overview of the Economics of International Trade and the Environment. This is a nice introduction tying the chapters together. If there is a weakness of the book, it would be the diversity in methodology across chapters, but of course that could also be considered a strong point. The articles are arranged in a logical fashion.

2. John Merrifield (University of Texas): The Impact of Selected Abatement Strategies on Transnational Pollution, the Terms of Trade, and Factor Rewards: A General Equilibrium Approach. This is a very nice static two-country general equilibrium model with transboundary pollution.

3. Brian Copeland (University of British Columbia): International Trade in Waste Products in the Presence of Illegal Disposal. This article presents a general equilibrium model of trade in waste.

4. James Markusen (University of Colorado), Edward Morey (University of Colorado), and Nancy Olewiler (Simon Fraser University): Environmental Policy when Market Structure and Plant Locations are Endogenous. This chapter presents a two-country, two-firm, three-product strategic policy model with increasing returns and pollution.

5. Michael Ranscher (University of Rostock): On Ecological Dumping. Ranscher presents a strategic trade model of lobbying for lax environmental regulation.

6. Scott Barrett (Johns Hopkins University): Strategic Environmental Policy and International Trade.

7. Graciela Chichilnisky (Columbia University): North-South Trade and the Global Environment. Chichilnisky presents a compact two-factor, two-product, two-country trade model with property right resource externalities.

8. Brian Copeland (University of British Columbia) and Scott Taylor (University of Wisconsin-Madison): Trade and Transboundary Pollution. This is a model with two regions, many products, and pollution externalities linked to trade.

9. Alistair Ulph (University of Southampton): Environmental Policy and International Trade when Governments and Producers Act Strategically. The Ulph model has two countries featuring strategic behavior by both governments and firms.

10. Edward Barbier (University of Wyoming) and Carl-Erik Schulz (University of Troms[empty set]): Wildlife, Biodiversity, and Trade.

11. Amitrajeet Batabyal (Rochester Institute of Technology): Games Governments Play: An Analysis of National Environmental Policy in an Open Economy.

12. David Robison (LaSalle University): Industrial Pollution Abatement: The Impact of the Balance of Trade. In a word, negative.

13. James Tobey (USDA): The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test. This Heckscher-Ohlin-Vanek model includes pollution control and finds no effect of environmental regulations on trade patterns.