Resource information
The paper empirically explores the
linkages between environmental regulations and international
trade flows. So far, empirical studies either have failed to
find any close statistical relationship or have delivered
questionable results due to data limitations. Using a
comprehensive new database for environmental regulations
across countries, a thorough empirical investigation of that
linkage for 119 countries and five high-polluting industries
is performed. No evidence is found to support the pollution
hypothesis that industries facing above-average abatement
costs with environmental regulations would prefer pollution
havens and relocate their activities. The exception is iron
and steel products, where a negative and statistically
significant link is established, implying that higher
compliance with international treaties and conventions and
more stringent regulations are associated with reduced net
exports. High-income countries, where environmental
regulations are usually more stringent in comparison to
middle or low income countries, have experienced a
considerable decline in the export-import ratio of iron and
steel products since the late 1970s. There is no clear
evidence that national governments choose sub-optimal
policies that result in insufficient regulations, so the
case for environmental standards within the WTO framework is
relatively weak.
