Now assume that this same country has a comparative advantage in sugar production. In this case liberalization will allow the country to export sugar and import rice, which cuts down on soil erosion. This scenario leads to a net benefit to the global environment, as rice farming is moved to locations that can presumably do it with less soil erosion. Here the national welfare effect is also unambiguously positive. Another potential environmental benefit of liberalization in developing economies is that they will see faster economic growth and be endowed with the resources to take appropriate environmental measures. The technology that Western firms use to reduce pollution would become more readily available to many South American countries if the FTAA goes into effect.
In order to develop rational policy suggestions, we must realize that opening markets to trade and preserving the environment are equally desirable goals. A principle of economic planning put forth by Nobel Laureate Jan Tinbergen is that each target of economic policy (in this case free trade and the environment) warrants a separate instrument aimed at it. So while environmental problems may be reinforced by trade policy, they are best resolved by environmental policy. This principle suggests the need for mutually reinforcing trade and environmental agreements between countries, which often involves tradeoffs. Sensible policy tradeoffs include "slightly less agriculture output in return for cleaner water; slightly more erosion in return for farm exports and income" (Runge, Freer Trade, Protected Environment. New York: Council on Foreign Relations Press, 1994 12). In practice, such arrangements were provided for in the environmental side agreement that was included in the North American Free Trade Agreement (NAFTA). This agreement insisted that the member countries adhere to certain environmental standards, and saw the formation of the trilateral Commission on Environmental Cooperation, which had the authority to oversee and enforce these regulations.
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