1. Trade, Environment, and Development in Mexico
Kevin P. Gallagher
Global Development and Environment Institute
Tufts University

2. Key Points
Mexico is a perfect laboratory to examine trade, environment, and development nexus
Overall, Mexico’s environment continues to worsen and is adversely affecting it’s economy
Economic integration strategies need to directly incorporate strong environmental provisions

3. Environmental Kuznets Curve

4. Limits of the EKC Empirical evidence is relatively weak
Limited to criteria air pollutants in developed countries
Turning points much higher than original estimates
Hasn’t held for single country trajectories
Damage leading to turning point could be irreversible or too costly to clean up
Drawing single-country development lessons from cross-sectional evidence is questionable

7. Potential Economic Costs of Waiting for Kuznets in Mexico

8. Is Mexico a Pollution Haven?

9. Mexican environmental policy has been inadequate
Established key environmental laws and institutions
Spending on environmental policy shrinking
Plant-level environmental inspections declining
“Side-agreement” institutions extremely limited

12. Implications for Policy
Underscores the need to couple environmental policy (at the national and international level) with economic integration
Strong environmental policy will not necessarily deter foreign investment
Ex-post analyses are important to draw lessons for future trade agreements (US approach to ERs ignores this).

13. Environmental Kuznets Curve
Scale Effects: if pollution per unit of output is constant but the scale of output increases then pollution will increase as well
Composition Effects: if pollution per unit of output remains unchanged but the sectoral composition of the economy shifts toward cleaner or dirtier economic activity
Technique Effects: reductions in pollution per unit of output due to technological change and transfer and/or rising incomes