Coping with Environmental Constraints on Exports

Abla M. Abdel-Latif and Jeffrey B. Nugent

Abstract

This paper identifies the major environmental constraints that are currently being imposed in the highly developed countries (DCs) with potentially large effects on developing country (LDC) exports. It analyzes their effects on exporters in LDCs from the perspective of transaction costs and derives some testable hypotheses concerning the different strategies and paths which different types of LDC producers would be likely to take in different environmental conditions. It then tests for the validity of these hypotheses based on a case study of leather exports of Egypt. It also makes use of comparable information on India’s leather exports and textile and other exports of other countries. The results suggest: (1) that legislated environmental regulations are less problematic for LDC producers than eco-labeling schemes; (2) that the most complete adjustments and accommodation to these regulations are attained when the producer-exporters are relatively large, have considerable experience in exporting and are highly dependent on the regulated markets for sales. Smaller firms are only likely to succeed in coping with these regulations if they have considerable help from governmental or non-governmental support agencies. Policy and other implications are derived.

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