However, there are ways to complement these two plans. Free trade agreements could contribute to the dissemination of cleaner techniques to improve standards. Specifically, the environmental provisions contained in trade agreements could strengthen the convergence of environmental standards and help reduce the carbon footprint in freer trade. With the Indian data, Mukhopadhyay, K., Chakraborty, D. (2006) tested these two hypotheses. They do not find support for the PHH, but the evidence supports the FEH, as the country exports more labour-intensive goods, which are more economically favourable. Their results also point out that political differences alone do not mean that trade liberalization will encourage “dirty industries” to migrate to less regulated countries. Effective environmental policies and institutional frameworks are needed at local, regional, national and international levels. The impact of trade liberalization on a country`s well-being depends on the presence of appropriate environmental policies within the country concerned (for example.
B the correct pricing of comprehensive environmental resources). Stringent environmental policies are compatible with an open trading system, creating markets for environmental goods that can then be exported to countries that follow the environmental paths, the so-called First Mover advantage. This is especially true for complex technologies such as renewable energy. The past half-century has been marked by an unprecedented expansion of international trade. Since 1950, world trade has increased more than twenty-seven times in volume. By comparison, global GDP has increased eight-fold over the same period. As a result, the share of international trade in world GDP rose from 5.5% in 1950 to 20.5% in 2006. More Frankel, J.A. (2009).
Environmental impact of international trade. Its link to transportation services is a concern about the role of trade in greenhouse gas emissions. International trade includes countries that specialize and export in products in which they have a comparative advantage and the importation of other products by their trading partners. This international trade process requires that goods be transported from the country of production to the country of consumption. It is therefore likely that international commercial expansion will lead to increased use of transportation services. More trade agreements can be concluded between developing, developed or developing and industrialized countries. Depending on the income level of countries contributing to the free trade threat, different assumptions about the impact of free trade agreements on greenhouse gas emissions have been developed. The scale effect refers to the impact on greenhouse gas emissions due to increased production or economic activity due to free trade. Open trade is expected to increase economic activity and hence energy consumption.
The composition channel refers to how trade liberalization alters the mix of a country`s production to the products for which it has a comparative advantage. According to the comparative advantage theory (Ricardo 1817), trade encourages countries to specialize in the products they produce most efficiently and thus become more efficient in their use of resources, thereby reducing resources and avoiding waste. The compositional effect will reduce greenhouse gas emissions if expanding sectors are less energy-intensive than contract sectors. Since the mid-1990s and early 2000s, an increasing number of free trade and economic integration (EIA) agreements have incorporated environmental aspects into the treaty text or have a separate environmental agreement, as was the case with the North American Free Trade Agreement (NAFTA).