ABSTRACT

Environmental issues are high among the litany of concerns about globalisation. Critics of globalisation contend that the competitive pressures resulting from increased openness and trade will induce a ‘race to the bottom’, with all countries lowering their environmental standards. In contrast, proponents of globalisation argue that trade restrictions are an inefficient and inappropriate way to resolve environmental problems. Efficiency considerations dictate that domestic environmental problems should be corrected using domestic environmental policy instruments, which internalise the environmental externalities (Esty 1994).