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Much of contemporary economic policy is based on the notion that free trade raises the standard of living of all countries. This is the position espoused by advocates of neoliberal economic policies such as those of the World Trade Organization (WTO), its precursor, the General Agreement on Treaties and Tariffs (GATT), and the North American Free Trade Agreement (NAFTA). Yet, many environmentalists and antiglobalization activists remain critical of that assertion that free trade benefits the environment, suggesting that free trade actually leads to a race to the bottom in which polluting industries migrate to countries with the lowest standards.

The argument about free trade begins with the assumption that tariffs, taxes, subsidies, and regulations across international boundaries distort the terms of trade. The purported consequences of ...

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