Trade and Environment
How trade liberalization affects the environment, and the growing movement to make trade rules climate-compatible.
The Trade-Environment Tension
Trade and the environment exist in an uneasy relationship. Trade increases economic activity, which can mean more emissions, resource extraction, and pollution. Shipping goods around the world burns fossil fuels -- international shipping alone accounts for roughly 3% of global CO2 emissions. At the same time, trade can spread green technologies, improve efficiency through specialization, and raise incomes to the point where countries can afford better environmental protection.
The 'pollution haven' hypothesis suggests that when environmental regulations differ between countries, polluting industries relocate to jurisdictions with weaker standards. Evidence for this is mixed -- some industries do relocate, but firms also value political stability, infrastructure, and proximity to markets. The 'race to the bottom' has not been as dramatic as feared, but neither is it a myth. Carbon-intensive industries have demonstrably shifted from countries with carbon pricing to those without.