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Against that backdrop, this article has two main objectives. First, it provides a conceptual framework for examining the relationship between environmental regulation and international competitiveness. Specifically, it categorizes the various competitiveness concerns arising from the intersection of trade liberalization and environmental protection, as well as the various responses that may be used to address such concerns. In doing so, this article aims to develop a framework for understanding issues of competitiveness in their various forms with greater attention to the nuances and subtleties of this concept than is found in most of the existing trade literature. Second, this article reviews why competitiveness matters. It argues, in particular, that, regardless of whether fears of industrial flight and other traditional focuses of race to- the-bottom theories are legitimate, competitiveness concerns affect the environmental policy-making process. While actual races-to-the-bottom in which environmental standards are lowered appear to be rare, considerable evidence suggests that government officials, facing the prospect of reduced sales, lost jobs and diminished investments in domestic industries caused by competition with foreign companies whose costs are lower due to more lax environmental requirements, often choose not to elevate environmental standards and sometimes even to relax enforcement of current standards. This competitiveness-driven "political drag" or "regulatory chill" creates a strategic dynamic that can make it difficult, and in some circumstances impossible, for governments to move towards optimum levels of environmental protection.
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