ABSTRACT
General Agreement on Tariffs and Trade (GATT) a multilateral trade agreement providing a framework for the gradual elimination of tariffs and other barriers to trade. The GATT was replaced in 1995 by the World Trade Organization (WTO). According to the free-trade principles that provided the basis for the GATT, and later for the WTO, countries could not restrict imports for environmental reasons except in limited cases such as protecting the health and safety of their own citizens. Many international environmental issues, including forest protection, ozone depletion, hazardous wastes, and global climate change and all these issues are linked, to some extent, to international trade policies. The burden of environmental externalities associated with trade may be borne by importers, exporters, or by others not directly involved in producing or consuming traded goods. The chapter examines the basic economic theory relevant to the trade/environment nexus, combining elements of the standard economic theory of trade with the theory of environmental externalities.
