This paper discusses environmental policies in response to foreign direct investment (FDI) in a symmetrie two-country setting, where firms' behavior affects government policy decisions. We show that two alternative equilibria with FDI are possible: (i) one with unilateral FDI, where one firm is...

The paper analyzes the relationship between trade policy and environmental protection. National and global environmental issues are distinguished. In principle, there is no conflict between an institutional order for international trade and national environmental policy. Protectionism against...