net worsening of the environment against the economic benefits of policy reform of the sort described above.

The reality is that while the environmental effects of reform will differ across sectors and regions of the world, some positive and some negative, there are many examples where cuts to subsidies and trade barriers would reduce environmental damage (Anderson 1992; Irwin 2002, pp. 48-54). For some time the OECD has been encouraging analysis of these opportunities (OECD 1996, 1997, 1998, 2003b). Environmental NGOs are increasingly recognising them too. They and the betterinformed development NGOs seem to be coming to the view that the net social and environmental benefits from reducing subsidies and at least some trade barriers may indeed be positive rather than negative, and that the best hope of reducing environmentally harmful subsidies and trade barriers is via the WTO’s multi-issue, multilateral trade negotiations process (see, e.g., Cameron 2007).

If there remains a concern that the net effect of trade reform on the environment may be negative nationally or globally, that should be a stimulus to check whether first-best environmental policy measures are in place and set at the optimal level of intervention, rather than a reason for not reducing trade distortions. This is because if they are so set, we would then know that the direct economic gains from opening to trade would exceed society’s evaluation of any extra environmental damage, other things equal (Corden 1997, Ch. 13).

Much environmental damage in developing countries is a direct consequence of poverty (e.g., the slash-and-burn shifting agriculture of landless unemployed squatters). In so far as trade reform reduces poverty, so it will reduce such damage. More generally, the relationships between per capita income and a wide range of environmental indicators have been studied extensively. Because richer people have a greater demand for a clean environment, income rises tend to be associated with better environmental outcomes once incomes rise above certain levels.<sup>32</sup> Even though more pollutive products are being consumed as incomes rise, many abatement practices have been spreading fast enough to more than compensate. And openness to trade accelerates that spread of abatement ideas and technologies, making their implementation in developing countries affordable at ever-earlier stages of development.

Estimating the global cost to society of all environmental damage that might accompany a reduction in subsidies and trade barriers, net of all environmental gains, is extraordinarily difficult both conceptually and empirically.<sup>33</sup> In the absence of any sufficiently comprehensive estimates it will be assumed that the net effect of reform on the environment would be zero.

When the environmental impact is global rather than local, as with greenhouse gases and their apparent impact on climate change, international environmental agreements may be required (see Cline 2004b). When developing countries are not

> 32 This is the theme of the recent book by Hollander (2003). For statistical evidence of the extent to which different environmental indicators first worsen and then improve as incomes rise (sometimes called the environmental Kuznets curve), see the special issue of the journal _Environment and Development Economics_ , Volume 2, Issue 4 in 1997 and the more-recent papers by and cited in Harbaugh, Levinson and Wilson (2002) and Cole (2003).

> 33 A beginning nonetheless is being made, with several governments funding ex ante evaluations of the WTO Doha round’s potential impact on the environment. The EU’s efforts include a workshop on methodological issues which are laid out in CEPII (2003), and further work has been contracted to the - University of Manchester whose progress can be traced at <u>http://idpm.man.ac.uk/sia trade/Consultation.htm. Ex post analyses are also being undertaken by NGOs. See, for example,</u> Bermudez (2004) for WWF’s sustainability impact assessment of trade policies during 2001-03.

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