Trade-induced pollution transfers and implications for Japan's investment and assistance

Traded commodities embody an environmental service, namely the amount of pollution emitted domestically when goods are produced for export. Japan’s extensive economic ties with its Asian Pacific trading partners necessitate special consideration of trade and environment linkages. The data presented in this paper indicate that bilateral trade with Japan has resulted in substantial net transfers of effluent loads during the period 1981-95. To remedy environmental inequality of this kind, we recommend the promotion of technology transfer from Japan to developing countries through foreign direct investment and development assistance. In a related context, results in the Appendix show how coordinating multilateral trade liberalization with cost-effective environmental policy can achieve the twin objectives of higher national income and environmental quality improvement