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Proposes a qualitative approach to the problem of determining when cross-issue trade-offs are likely to be necessary and applies it to the Tokyo and Uruguay Round negotiations on safeguards to protect domestic industries from problems related to increases in imports. (Abstract amended)

THIS PAPER ANALYZES THE POLITICAL ECONOMY OF ENVIRONMENTAL-POLICY FORMATION IN A TRADING ECONOMY WITH ESTABLISHED RULES FOR ADMINISTERED PROTECTION. THE AUTHORS ARGUE THAT THE SOCIAL COSTS ASSOCIATED WITH THE ADOPTION OF AN INEFFICIENT ENVIRONMENTAL REGIME ARE LIKELY TO BE COMPOUNDED BY INDUCED RESTRICTIONS ON TRADE WHEN THE EFFECTED INDUSTRIES ARE IMPORT COMPETING. THE PREFERENCES OF INTEREST GROUPS FOR ALTERNATIVE ENVIRONMENTAL REGIMES TEND TO BE LINKED TO THE LEGAL-INSTITUTIONAL SETTING IN WHICH TRADE POLICY IS CONDUCTED. UNDER EXISTING RULES AND PRACTICES IN THE AREA OF ADMINISTERED PROTECTION, THERE IS REASON TO BELIEVE THAT INTEREST GROUP PREFERENCES FOR AN INEFFICIENT APPROACH TO POLLUTION CONTROL WILL BE STRENGTHENED BECAUSE THE ADOPTION OF SUCH A REGIME IS MORE LIKELY TO LEAD TO A CONCOMITANT INCREASE IN TRADE BARRIERS.

Since the mid-1980s a substantial body of research has taken shape on trade in services. Much of this is inspired by the WTO and regional trade agreements. However, an increasing number of papers focus on the impacts of unilateral services sector liberalization. The literature touches on important linkages between trade and FDI in services and the general pattern of productivity growth and economic development. This paper surveys the literature on services trade, focusing on contributions that investigate the determinants of international trade and investment in services, the potential gains from greater trade, and efforts to cooperate to achieve such liberalization through trade agreements. There is increasing evidence that services liberalization is a major potential source of gains in economic performance, including productivity in manufacturing and the coordination of activities both between and within firms. The performance of service sectors, and thus services policies, may also be an important determinant of trade volumes, the distributional effects of trade, and overall patterns of economic growth and development. At the same time, services trade is also a source of increasing political unease about the impacts of globalization on labour markets, linked to worries about offshoring and the potential pressure this places on wages in high income countries.