Competitiveness and environmental
            standards : some exploratory results
Contrary to common perceptions, higher
            environmental standards in industrial countries have not
            tended to lower their international competitiveness, the
            author contends.  There has been little systematic
            relationship between higher environmental standards and
            competitiveness in environmentally sensitive goods (those
            that incurred the highest pollution abatement and control
            costs in the U.S. in 1988).  Among the author's
            findings about what determines trade flows in
            environmentally sensitive goods: (a) environmental spending
            has been a small share of total spending -- so it is
            unlikely on its own to have caused shifts in comparative
            advantage in most industries; (b) differences in
            environmental spending among industrial countries seem to
            have been minor; (c) environmental spending has been
            concentrated in a few basic industries under heavy pressure
            to structure the international division of labor; (d) energy
            use and environmental spending are closely linked; and (e)
            positive adjustment and increased comparative advantage in
            environmentally sensitive goods were more pronounced in
            countries where environmental policies encouraged investment
            rather than current spending. The costs of environmental
            standards depend not only on physical characteristics but
            also on the policies chosen.  The reductions industrial
            countries have achieved in the main pollutants differ
            greatly across countries.  In the United States, which has
            some of the highest private environmental spending (as a
            share of GDP), investments have been a declining share of
            spending.  The United States also has some of the lowest
            reductions in abatement, which may mean that it has
            succeeded less than other countries in internalizing
            environmental costs.  Compliance with higher environmental
            standards is not a zero-sum game.  Higher environmental
            standards to reduce the social cost of pollution is a new
            source of permanent structural change. Countries that adjust
            early and invest in environmental protection technology can
            maintain and even create comparative advantage in
            environmentally sensitive industries.  Private costs
            incurred to reduce the social cost of pollution may, apart
            from the social benefit of lower pollution, also bring
            private benefits.  Adjustment can mean shifting to producing
            less pollution-intensive goods.  Pressures toward this end
            are likely to increase as environmental awareness becomes
            more common. Instead of lobbying for protection, industries
            struggling with environmental spending should lobby for
            better environmental policies -- that is, policies and
            standards that encourage efficient abatement.  Demands for
            protection because of differences in environmental spending
            are likely to be counterproductive and to retard adjustment
            toward a new way of competing. Ecodumping duties could do
            little for the environment but much harm to the trading system.