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Trade Liberalization and Industrial Pollution in Mexico: Lessons for the FTAA"

Author

Listed:
  • Kevin Gallagher

    (The Global Development And Environment Institute at Tufts Universty)

Abstract

As the barriers to hemispheric trade and integration are lowered, it will be asked whether we will we hear the "giant sucking sound" of poorer nations luring U.S. and Canadian firms south to take advantage of low wages and lax environmental regulations? Or, will Latin American nations passively accept this problematical specialization in doing the world's cheap and dirty work? Mexico is the ideal laboratory for such research. Though NAFTA took effect in 1994, trade liberalization in Mexico began long before that. From 1982 to 1996 Mexico transformed itself from one of the most closed to one of the most open economies in the world. As a first step in such efforts, this paper looks at the relationship between industrial pollution and economic activity in Mexico, compares those results to the United States, and draws out implications for the FTAA. The study finds that many of the industries deemed the dirtiest in the world economy are actually cleaner in Mexico than in the US, and the industries labeled the cleanest are dirtier in Mexico. To generalize, this exhibits that trade liberalization can have both positive and negative environmental effects in developing economies. Sectors where plant vintage determines pollution levels can benefit from their ability to take advantage of newer technologies after liberalizing trade, as is the case with the Mexican steel industry. However, if pollution is a function of end of pipe technology, as in the paper industry, pollution levels are determined by levels of regulation, enforcement and compliance, which are lower in Mexico.

Suggested Citation

  • Kevin Gallagher, 2001. "Trade Liberalization and Industrial Pollution in Mexico: Lessons for the FTAA"," International Trade 0106003, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0106003
    Note: Type of Document - PDF; pages: 24; figures: n/a. Other working papers available at www.gdae.org
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    File URL: http://econwpa.repec.org/eps/it/papers/0106/0106003.pdf
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    References listed on IDEAS

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    1. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
    2. Ros, Jaime & Draisma, Joost & Lustig, Nora & Kate, Adriaan Ten, 1996. "Prospects for growth and the environment in Mexico in the 1990s," World Development, Elsevier, vol. 24(2), pages 307-324, February.
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    Cited by:

    1. Julie A. Nelson, "undated". "04-03 "Is Economics a Natural Science?"," GDAE Working Papers 04-03, GDAE, Tufts University.
    2. Julie A. Nelson, "undated". "03-11 "Clocks, Creation, and Clarity: Insights on Ethics and Economics from a Feminist Perspective"," GDAE Working Papers 03-11, GDAE, Tufts University.
    3. Francisco Aguayo & Kevin P. Gallagher, "undated". "03-05 "Economic Reform, Energy, and Development: The Case of Mexican Manufacturing"," GDAE Working Papers 03-05, GDAE, Tufts University.
    4. Timothy A. Wise, "undated". "05-02 "Understanding the Farm Problem: Six Common Errors in Presenting Farm Statistics"," GDAE Working Papers 05-02, GDAE, Tufts University.
    5. Colyer, Dale, 2002. "Environmental Impacts Of Agricultural Trade Under Nafta," Conference Papers 19104, West Virginia University, Department of Agricultural Resource Economics.
    6. Qureshi, M.S., 2006. "Trade Liberalization, Environment and Poverty: A Developing Country Perspective," WIDER Working Paper Series 045, World Institute for Development Economic Research (UNU-WIDER).
    7. Julie A. Nelson, "undated". "04-01 "Beyond Small-Is-Beautiful: A Buddhist and Feminist Analysis of Ethics and Business"," GDAE Working Papers 04-01, GDAE, Tufts University.

    More about this item

    Keywords

    Economic theory; Environmental Policy; Sustainability; trade liberalization; NAFTA; FTAA; industrial pollution;

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General

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