The economic transformation of Mexico, from a relatively closed, import-substituting economy before 1985, to a major trading nation in 2004, offers the opportunity to empirically examine the extent to which new trade agreements affect the environment. In 1993, the authors Jagdish Bhagwati (a prominent trade economist from Columbia University) and Herman Daly (a well-known environmental economist then working at the World Bank) made contradictory claims. Bhagwati argued that agreements such as NAFTA (North American Free Trade Agreement) would raise incomes in developing countries to a point where governments would begin to protect the environment. Daly argued that free trade would provide an incentive for heavily polluting industries in developed countries such as the United States to move their operations to developing countries where pollution control was more inexpensive and lax. This chapter introduces the trade and environment debate and the theoretical lenses through which economists and other analysts have begun to examine it. It also provides an outline of the argument that will be advanced later in the book, as well as summary of the rest of the book and its findings.
