Environmental Product Standards in North-South Trade

Consumption is one channel through which the environment is damaged. To protect the environment, various product standards have been introduced across the world. This paper uses a new economic geography framework to explore the effects of environmental product standards on environment in a North-South trade model. It examines the situation in which the North unilaterally introduces an environmental product standard. Specifically, those products that do not meet the standard are not allowed to be sold in the North's market. It is found that such a standard may worsen the North's environment but improve the South's environment as a result of firm relocation.