Contradictions between WTO and sustainable development? The case of environmental dumping

Abstract

AbstractThis paper discusses how the WTO agreement deals with the environmental and competitiveness concerns linked to trade and environmental policies. As the use of traditional export subsidies and other protectionist trade policies are now strongly restricted in the WTO, many countries will try to find other ways to increase competitiveness. One way of doing this is to use lax environmental taxation or regulation as indirect subsidies (i.e. ‘environmental dumping’). If this is done, the reduced possibilities of using traditional protectionist trade policies could harm the environment, thus reducing the overall welfare gain from trade liberalization. Environmental countervailing tariffs have been suggested as a way of reducing incentives for environmental dumping. The WTO rules are examined in order to analyse the feasibility of the uses of environmental countervailing tariffs in the current and future framework of WTO, and the incentives and welfare consequences are analysed under different market scenarios. Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment