Foreign Direct Investment and Environmental Taxes

This paper studies the effect of foreign direct investment (FDI) on environmental policy stringency in a two-country model with trade costs, where FDI could be unilateral and bilateral and both governments address local pollution through environmental taxes. We show that FDI does not give rise to ecological dumping because the host country has an incentive to shift rents away from the source country toward the host country. Environmental policy strategies and welfare effects are studied under the assumption that parameter values support FDI to be profitable.

The Services Directive: the legislative process clears the first hurdle

In January 2004 the European Commission put forward a proposal for a Directive on services in the internal market that triggered considerable controversy both within the European institutions and amongst the public at large. It was praised by its proponents as a breakthrough for the internal market and sharply criticised by opponents as being a neoliberal abandonment of the Community approach that would merely encourage social and ecological dumping. This paper looks beyond the polemics, myths and ideological battles associated with the issue and attempts to examine the core elements of the proposal in order to identify its objectives and the problems associated with it. It also traces the intensive work carried out by the European Parliament, which discussed the proposal over a period of two years before coming to a decision on it. The ETUC critically monitored the Parliament and the Council during this process, articulating its demands very clearly — and with a large degree of success — through a combination of intensive lobbying and demonstrations.