Neutrality of Instruments: Pollution, Protection and Efficiency of Policy

The impact of environmental management on international trade and the location of production, as outlined in Chapter 3 and 4, has been examined under the implicit assumption that the internalisation of environmental externalities and its impact on competitive relationships between nations proceeds without government interference. In other words, as processes and products are modified to meet collectively-established environmental norms, the costs are fundamentally reflected in product prices or factor returns, and the international competitive effects — both short and long term — are allowed to work themselves out via normal competitive relationships within the context of the market.