1. International Economics Trade and the Environment
02/01/62
Session 13
Trade and the Environment
Aj.Noom Tel

2. Two Different Effects of Trade toward the Environment
1.The larger size of the economy leads to more pollution, when other thing equal.
1.The higher income can lead to more pressure on government to enact tougher environmental protection policies

3. Three Basic Patterns on International Trade and Environment
1. Environmental harm declines with rising income per person.
2. Environmental harm rises with rising income per person.
2. The relationship is an inverted U.

4. This pattern is mostly found in the developing counties
The reason behind this is base on the H-O theory; as the world moves toward freer trade, production of capital – and – skill intensive products expands in the developed countries and shrinks in the developing country.

5. This pattern is mostly found in the developed counties
The reason behind this is base on the H-O theory; as the world moves toward freer trade, production of capital – and – skill intensive products expands in the developed countries and shrinks in the developing country.

6. This pattern is mostly found in the undeveloped counties
The demand for better environment is weak at first as the people are willing to accept some environment harm to increase income. But at some point at which the dire effects of poverty have been reduce enough, the demand for better quality becomes more forceful.

7. Types of Externalities and Production-market Prescriptions

8. Trade and Domestic Pollution
Increased Producer Surplus
Sd+ $0.30
World Price (with Trade) Dd
Net Gain Sd
Decreased Consumer Surplus
Without Trade
Export
Import
Decreased External Cost
Increased External Cost
MEC

9. Tran-border Pollution
Marginal Costs of waste dumping (loss of river services in Austria)
German’s marginal benefits from dumping waste in the river
“Optimal amount of pollution” (This is because both country share the different kind of benefit)
How can Austria enforce German to produce at this point ?

10. Global Environmental Challenges
Global Problems Need Global Solutions
Extinction of Species
Overfishing
CFCs and Ozone
Greenhouse Gases