Is free trade bad for the environment?

Alberta School of Business researcher finds:

  • Between 1994-98, pollution in the U.S fell due to the effects of trade liberalization following NAFTA.
  • New market access drove individual manufacturing companies to adopt cleaner technologies.
  • U.S. producers also exploited new opportunities to outsource dirty production to Mexico.
  • Together, this technology adoption and outsourcing explains two-thirds of the clean-up of U.S. manufacturing.

Research abstract:
The unobserved responses of individual polluters are often used to rationalize the aggregate effects of international trade on the environment. In this paper, I provide the first evidence of these responses. I estimate the effects of NAFTA on the emissions of particulate matter and sulfur dioxide from manufacturing plants in the United States. My findings suggest that trade liberalization led to significant reductions of these pollutants at affected plants. On average, nearly two-thirds of the reductions in PM emissions from the U.S. manufacturing sector between 1994 and 1998 can be attributed to trade liberalization following NAFTA.

The article, "Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing" by Jevan Cherniwchan is published in the Journal of International Economics.

Jevan Cherniwchan

Jevan Cherniwchan studies the interaction between international trade and economic growth and environmental outcomes. He also studies the determinants of international trade prior to World War I. Jevan attended the University of Alberta (BA (Hons)), University of British Columbia (MA Economics), and University of Calgary (PhD). He is currently an Assistant Professor in the Marketing, Business Economics and Law department at the Alberta School of Business.