Chapter 8 Nontariff Distortions To Trade.ppt

* * * * * * * * * * * * * * * * * LABOR AND ENVIRONMENTAL STANDARDS Developing countries view such regulations as thinly veiled protectionism and would tend to rob their best avenues to reduce the level of poverty The same type of argument applies to national differences in environmental standards Pollution intensive industries will move to countries with low environmental standards Countries with high standards are disadvantaged LABOR AND ENVIRONMENTAL STANDARDS There is little empirical evidence of this effect for two reasons There are a great many factors involved in plant location decisions of which environmental standards are only one Research shows it has a small effect Pollution levels seem to be related to GDP per capita Up to a point, pollution increases as GDP increases LABOR AND ENVIRONMENTAL STANDARDS As GDP reaches higher levels, pollution levels decline This suggests the problem will solve itself as poorer countries become wealthier The antidote for pollution may be more economic growth Applying the standards of developed countries to developing countries is a nontariff barrier to trade Environmental regulations would also tend to put more plants in developed countries LABOR AND ENVIRONMENTAL STANDARDS Both of these reasons would slow the growth of developing countries This would actually increase the pollution level in that country The WTO is unlikely to establish global standards on labor and environmental issues One promising development is trade negotiations between countries Parties commit to rigorous enforcement of their own appropriate standards TRANSPORTATION COSTS AND TRADE Transportation costs are not zero as assumed earlier reduce the quantity of trade between countries by raising the price of imported goods A good will be traded internationally if transportation costs are low enough so that it is profitable to trade the goods between countries TRANSPORTATION COSTS AND TRADE Figure 8.4 Effects of Transportation Costs on International Trade D