Exporting Pollution?

Long before Larry Summers shocked the elite by suggesting that men and women might be different he signed on to a World Bank memo noting:

"I think the economic logic behind dumping a load of toxic waste in the
lowest wage country is impeccable and we should face up to it."

A number of people suggested that the US was doing just this as lower tariff barriers made it easier to export dirty manufacturing industries and import the goods.  An NBER paper, however, finds no evidence for this effect.  Quoting from the NBER Digest:

Imports overall grew by 318 percent during the period. But according to World Bank data that characterizes industries by their pollution intensity, imports of goods manufactured in highly polluting processes grew at a much slower rate. In other words, just as the U.S. manufacturing sector was growing while simultaneously shifting toward clean industries, the same thing was happening to our imports: they were rising, but the percentage of goods coming from polluting industries was going down. "The cleaner U.S. manufacturing composition is not offset by dirtier imports," the authors write. "Rather, the composition of imports has also become cleaner."

One reason pollution hasn’t been exported may be that the dirtier (older) industries have more political power and have resisted tariff reductions.  The authors find, however, that even if one eliminated all tariffs on manufactured goods pollution would still not be exported.

It’s not that this wouldn’t be a good idea, it’s just that it so happens that poor countries don’t have a comparative advantage in producing the goods that require a lot of pollution.  Of course, if we tax pollution in the United States at higher levels it will make more sense to export it – an interesting dilemma.


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