Even though the interlinkage between trade and environment is obvious and important, it has been acknowledged as such only recently by the world community. Yet it is far from being truly addressed, as is indicated by the negotiations up to the Uruguay Round Final Act, signed in April 1994, as the most current example. Mankind remains faced with the crucial need of addressing this interlinkage -the objective to which this report is devoted. My own growing interest in this subject and the choice to work on and publish this report, which has been defended as my Ph.D. dissertation at the University of Vienna, has had a long personal history. Ultimately it was made possible by important teachers of mine -from primary and high school up to universities -, by colleagues and friends, but certainly also by my family -as each of them answered my questions and communicated their own ideas. Along the path of research it was only the specific support and inspiration of a large number of people in various different ways that made it possible for the report to now be in front of you in the current form.

Inhalt

I. Introduction.- II. The Issues of Interlinkage.- 1. Environmental Regulation Affecting Trade Flows.- 1.1. Product Regulation.- 1.2. Production Process Regulation.- 2. Trade Liberalization Affecting the State of the Environment.- 3. Further Interlinkages.- 3.1. Trade Bans to Save Endangered Species.- 3.2. Trade Policy as an Enforcement Instrument for International Environmental Agreements.- 3.3. Trade Implications of International Environmental Initiatives.- III. The Regulatory Issue.- 1. Current International Regulation.- 1.1. The General Agreement on Tariffs and Trade (GATT).- 1.1.1. Environmental Production Process Regulation and its Cost Allocation.- 1.1.2. Environmental Product Regulation.- 1.1.3. Exceptions for Environmental Regulation in GATT.- 1.2. The OECD Guiding Principles.- 1.3. European Community Legislation.- 2. Theoretical Background.- 2.1. The Effects of Trade Liberalization on the Environment.- 2.1.1. National Environmental Policy Set Sufficiently.- 2.1.2. National Environmental Policy Set Insufficiently.- 2.1.3. Conclusion.- 2.2. Evaluating Trade Measures for Environmental Ends.- 2.2.1. Cases where Trade Strongly Contributes to the Environmental Problem.- 2.2.2. Geographic Scope of the Environmental Problem.- 2.2.2.1. Global and Transboundary Environmental Problems.- 2.2.2.2. National and Local Environmental Problems.- 3. Opposing Demands for a Regulatory Change and its Paradigmatic Background.- 3.1. Paradigms of the Interrelationship between Economy and Environment.- 3.2. Conclusions for the Trade and Environment Relationship.- 3.2.1. Frontier Economics and Environmental Protection.- 3.2.2. Resource Management.- 3.2.3. Eco-Development.- 3.3. Conclusion for Further Regulatory Development.- IV. Divergent Environmental Process Regulation in Open Economies.- 1. Theoretical Approaches.- 1.1. Effects of Environmental Policy in a Traditional Trade Theory Model.- 1.2. Economic Geography and the Choice of Clean Industry Location.- 1.3. Environmental Policy and Strategic International Trade.- 1.3.1. Environmental Policy Affecting Strategic Producer Behavior.- 1.3.2. Environmental Policy as a Strategic Trade Instrument of Governments.- 1.4. Environmental Policy, Innovation and Competition.- 2. Empirical Evidence.- 2.1. Environmental Policy Affecting Production and Trade.- 2.1.1. Recent Empirical Studies.- 2.1.2. Limitations of the Studies.- 2.1.2.1. Determination of Environmental Control Costs.- 2.1.2.2. Time Period.- 2.1.2.3. Benefits.- 2.2. Environmental Policy Affecting Industry Location.- 3. Considerations for Austria.- 3.1. Environmental Control Costs.- 3.2. International Competitiveness in Industries with Strict Environmental Regulation.- 3.3. Environmental Goods and Services Industries.- 3.4. Criteria for Further Empirical Analysis.- V. Modeling the Environment-Economy Interaction for Austria in a Trade-Focused Computable General Equilibrium Framework.- 1. The Method of Computable General Equilibrium Modeling.- 1.1. Computable General Equilibrium Modeling for Environmental Policy Analysis.- 1.2. Basic Characteristics of a Computable General Equilibrium Model.- 1.2.1. Idea and Model Structure.- 1.2.2. Time Horizon, Comparative Static and Dynamic Models.- 1.3 The History of Computable General Equilibrium Modeling and its Major Applications.- 1.3.1. The Johansen Approach.- 1.3.2. The Development of Solution Techniques.- 1.3.2.1. Solution Strategies.- 1.3.2.2. Solution Algorithms.- 1.3.3. A Classification of Current Traditions and Applications.- 1.4 Environmental Computable General Equilibrium Models.- 1.4.1. Overview.- 1.4.2. Characteristics and Results of Recent Environmental CGE Studies.- 1.4.2.1. Single Country and Single Region Static Modeling.- 1.4.2.2. Single Country Dynamic Modeling.- 1.4.2.3. Multi Country Modeling.- 2. The Austrian Environment and Trade Model.- 2.1. Model Structure.- 2.1.1. Production.- 2.1.2. Trade.- 2.1.3. Environment.- 2.1.3.1. Emissions.- 2.1.3.2. Environmental Policy.- 2.1.3.3. The Energy Sector.- 2.2. Formal Description.- 2.2.1. Costs.- 2.2.2. Demand.- 2.2.3. Producer Behavior.- 2.2.4. Permits Market.- 2.2.5. GDP.- 2.3. Data Basis.- 2.3.1. Social Accounting Matrix.- 2.3.2. Energy Expenses.- 2.3.3. Energy Supply.- 2.3.4. Emissions.- 2.3.5. Time Behavior Parameters.- 2.3.5.1. Productivity Changes.- 2.3.5.2. Factor Growth.- 2.3.5.3. Elasticities of Substitution.- 2.4. Implementation.- 3. Policy Simulations - The Effects of Unilateral Policy.- 3.1. Base Case.- 3.2. Environmental Policy.- 3.2.1. Unilateral, Sectorally Uniform Environmental Policy.- 3.2.2. Unilateral, Sectorally Differentiated Environmental Policy.- 3.3. Conclusions.- 3.4. Benefits.- 3.5. Evaluation of the CGE Approach.- VI. Conclusions.- 1. Categorizing the Issues.- 2. Current International Regulation.- 3. Trade and Environment in the Theoretical Framework.- 4. Trade Measures for Environmental Ends?.- 5. Paradigmatic Background.- 6. Further Regulatory Development.- 7. Effects of Divergent Process Regulation.- 8. The Case of Austria.- 9. Empirical Quantification of the Economic Effects of Unilateral Environmental Action.- Appendix 1 Uruguay Round Decision on Trade and Environment.- Appendix 2 Environmental Policy Shifting the General Equilibrium Supply Curves in a Trade Model.- Appendix 3 A Schematic Social Accounting Matrix.- Appendix 4 Tables.- References - General.- References - CGE.