ABSTRACT
This chapter focuses on the concept of sustainable development and whether or not it is useful as a guide to the future. Market imperfections, including intertemporal externalities, open-access resources, and market power, create incentives that can interfere in important ways with the quest for sustainable development. Restoring efficiency may well result in an improvement in sustainability, but efficiency may be neither necessary nor sufficient for sustainability. The law of comparative advantage suggests that trade can benefit both parties. The notion that increasing income from trade involves a self-correcting mechanism would have quite a different meaning if part of that correction involved exporting the pollution-intensive industries to other countries. The General Agreement on Tariffs and Trade, the international agreement that laid the groundwork for the World Trade Organization (WTO), was first signed in 1947. As an organization devoted to freer trade, the WTO adjudicates disputes among trading nations through the lens of its effect on trade.
