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Environmental Impacts of a North American Free Trade Agreement

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  • Grossman, Gene
  • Krueger, Alan B

Abstract

In general, a reduction in trade barriers will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity and by initiating a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. We first use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulphur dioxide and `smoke') that concentrations increase with per capita GDP at low levels of national income, but decrease with GDP growth at higher levels of income. We then study the determinants of the industry pattern of US imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in US industry influences the pattern of international trade and investment. Finally, we use the results from a computable general equilibrium model to study the likely compositional effect of a North American Free Trade Agreement (NAFTA) on pollution in Mexico.

Suggested Citation

  • Grossman, Gene & Krueger, Alan B, 1992. "Environmental Impacts of a North American Free Trade Agreement," CEPR Discussion Papers 644, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:644
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    References listed on IDEAS

    as
    1. Harkness, Jon P, 1978. "Factor Abundance and Comparative Advantage," American Economic Review, American Economic Association, vol. 68(5), pages 784-800, December.
    2. Siebert, Horst, 1977. "Environmental Quality and the Gains from Trade," Kyklos, Wiley Blackwell, vol. 30(4), pages 657-673.
    3. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "A North American Free Trade Agreement: Analytical Issues and a Computational Assessment," World Scientific Book Chapters,in: Globalization And International Trade Policies, chapter 12, pages 393-424 World Scientific Publishing Co. Pte. Ltd..
    4. McGuire, Martin C., 1982. "Regulation, factor rewards, and international trade," Journal of Public Economics, Elsevier, vol. 17(3), pages 335-354, April.
    5. Krueger, Alan B & Burton, John F, Jr, 1990. "The Employers' Costs of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 228-240, May.
    6. repec:fth:michin:289 is not listed on IDEAS
    7. John M. Abowd, 1990. "The NBER Immigration, Trade, and Labor Markets Data Files," NBER Working Papers 3351, National Bureau of Economic Research, Inc.
    8. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
    9. Yohe, Gary W., 1979. "The backward incidence of pollution control--some comparative statics in general equilibrium," Journal of Environmental Economics and Management, Elsevier, vol. 6(3), pages 187-198, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Customs Union; Environment; Mexico; Pollution; Trade Liberalization;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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