Private vs . Public Regulation : The Political Economy of International Environmental Protection ∗

WTO standard-setting and NGO labelling are promoted as alternative approaches to international environmental protection. This has been particularly true in the context of transboundary problems such as biodiversity protection. We develop a model with realistic features and to compare the two approaches, and observe the potential inter-play between them. In a world in which the WTO is subject to political pressure from producers, the threat of industry resistance leads the WTO to reduce its proposed standard so as to raise the likelihood of implementation. If WTO and NGO schemes are mutually exclusive the existence of a potential NGO ‘alternative’ increases industry resistance to WTO proposals. It may induce the WTO to increase or decrease the stringency of its proposals, and has an ambiguous impact on expected welfare. When the scheme may co-exist, however, the existence of the NGO lessens producer opposition to WTO activities, allows the WTO to be ‘bolder’ in its proposals, and is unambiguously good for welfare. One policy implication is that if the WTO is to be empowered with a supernational regulatory role, NGO’s should not be excluded from continuing to operate their own voluntary labeling programs.