North - South Trade *

RRH: ENVIRONMENTAL PRODUCT STANDARDS LRH: Jota Ishikawa and Toshihiro Okubo Abstract 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. We examine the situation in which North unilaterally introduces an environmental product standard. Specifically, those products that do not meet the standard are not allowed to be sold in North’s market. We find that such a standard may worsen North’s environment but improve South’s environment due to firm relocation. * Ishikawa: Hitotsubashi University and RIETI, Faculty of Economics, 2-1 Kunitachi, Tokyo 186-8601, Japan. Tel: +81-42-580-8794, Fax: +81-42-580-8882, E-mail: [email protected]. Okubo: Kobe University, Research Institute for Economics and Business Administration (RIEB), 2-1 Rokkoudai Nada Kobe 657-8501, Japan. Tel/Fax: +81-78-803-7001, E-mail: [email protected]. We are grateful to two anonymous referees and seminar participants at RIETI for their helpful comments and suggestions. Any remaining errors are our own responsibility. We acknowledge financial support provided by the Ministry of Education, Culture, Sports, Science and Technology of Japan under the Global COE Project. JEL Classification Numbers: F18, Q54 Abbreviations: NEG, R&D, U.S., EU,CRS,CES,D-firm,C-firm Number of Figures: 0 Number of Tables: 0 Date: 29th September 2010 Address of Contact Author: Jota Ishikawa, Hitotsubashi University and RIETI, Faculty of Economics,