ABSTRACT
This chapter examines the effects of environmental control measures, as applied in Germany and the US, on international trade and competitiveness. It is likely that the environmental control effect on Germany will be greater than that of the US Since Germany has been specializing in pollutive industries from which more resources are withdrawn, achieving an environmental control policy comparable to US will result in larger withdrawal of resources from the production. Analogous to an optimum tariff analysis, Germany will reach at a higher level of welfare as long as the intersection of new offer curves remain within the shaded area created by US offer surve and German trade indifference curve representing conditions before environmental control. At the industry level, the trade impact of an industry's environmental control costs is determined by the magnitude of environmental control costs, the trade shares of industries, and the input linkages from other industries.
