## ABSTRACT

Linkages between international trade and environment are bidirectional. Both the literature on impacts of domestic environmental policies on international trade and impact of international trade-investment flows on environmental sustainability are vast and expanding by each day. On one hand, stringent domestic environmental policies/regulations are often criticized for creating distortions in international trade patterns owing to the associated cost of compliance escalation and the consequent adverse implications on competitiveness (Barrett 1994, Sartzetakis and Constantatos 1995). On the other hand, international trade and export liberalization policies may influence environmental sustainability through three different but integrated pathways, namely scale effect (attributed to accelerating economic growth), composition effect (attributed to structural changes in production/economy) and technique effect (attributed to technological progress; Frankel 2009). However, trade liberalization may not be necessarily detrimental for the environment (Burguet and Sempere 2003).1