Document Type

Article

Publication Date

1999

Abstract

This Dialogue attempts to place the conflict between the principles of negative externalities and comparative advantage in a less theoretical context. To that end, the author examines the relationship between national incentives to protect natural resources and international trade rules that seek to restrict the use of natural resource subsidies. The author further evaluates the extent to which the international trade rules account for the problem of negative externalities, and the extent to which the rules recognize the potentially effective role that national incentive programs can play in correcting market failures. From this evaluation, the author concludes that the legitimacy of "green" subsidies under international trade rules is uncertain. The current trade rules define green subsidies too narrowly and may discourage the use of national incentive programs to improve protection of natural resources and the environment. Therefore, the author proposes changes to ensure that national incentives to protect natural resources are effectively recognized and preserved under international trade law.