The question of whether environmental standards hinder free trade is a hotly debated topic. Some argue that these standards create unnecessary barriers, making it difficult for businesses to engage in international trade. On the other hand, proponents argue that environmental standards are essential for ensuring sustainable development and protecting the planet for future generations.
Trade can have both positive and negative effects on the environment1. Economic growth resulting from trade expansion can have an obvious direct impact on the environment by increasing pollution or degrading natural resources. However, increased trade can in turn, by supporting economic growth, development, and social welfare, contribute to a greater capacity to manage the environment more effectively. Open markets can improve access to new technologies that make local production processes more efficient by diminishing the use of inputs such as energy, water, and other environmentally harmful substances. Similarly, trade and investment liberalisation can provide firms with incentives to adopt more stringent environmental standards.
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