Free Trade and the Environment

Free Trade and the Environment examines the impact economic integration has on the environment, using Mexico, which transformed itself from one of the most closed economies to one of the world's most open, as a case study. As new nations join the Free Trade Area of the Americas or the World Trade Organization, they are considering the path taken by Mexico nearly 20 years ago. The author investigates two commonly held and opposing beliefs in the policy community about the impact of free trade on the environment. While some believe that free trade will raise incomes in developing countries, thus encouraging governments to protect the environment, others argue that free trade simply provides an incentive for heavily polluting industries to move to developing countries with lax environmental regulations. The author shows that for Mexico in fact neither position is correct, and concludes with suggestions for free trade policies that couple environmental benefits with economic integration.