ABSTRACT
It is assumed that all people living on Earth and many generations can consume resources at the per capita level in high-wage countries without inducing ecological collapse. In this chapter, the authors analyses the links between trade and growth, and between growth and environmental impact and evaluate the claims. G. M. Grossman and A. B. Krueger were careful in their analysis and concluded that economic growth not lead automatically to higher environmental quality but may give rise to increases in pressure for stronger environmental policy. For J. Bhagwati—one of the strongest proponents of the belief that free trade not lead to environmental degradation—the engine of environmental improvement comes from the demand of the beneficiaries of free trade for a better environment as their incomes improve. Neither economic analysis nor economic policy can be independent of environmental concerns. The protagonists of free trade base their argument on the assumption that wages can be levelled upwards rather than downwards.
