The above argument in no way justif

The above argument in no way justifies the transfer of polluting industries or the shipment of
hazardous waste from developed to developing countries. In the case of direct foreign investment, environmental standards or charges are a relatively minor factor by comparison to access to new markets and to low-cost labor and material. Moreover, the environmental standards of developed countries are embodied in the capital and technology of the industry that moves to a developing country. Furthermore, the liability laws of the country of origin may apply and exported products must reflect the environmental standards of the trading partners. Shipment of hazardous waste is not justified because of the asymmetry of information regarding its true nature and potential risks between the shipper and receiver and because the receiver (developing country) lacks the knowledge and technology to treat and dispose of the waste safely. Furthermore, because of the low or zero assimilative capacity of the environment for hazardous waste, and the risk of leakage, spill, or dumping during transport, hazardous and toxic waste is best handled at its place of origin. In light of the uncertainty and asymmetry of information, treatment and disposal at the source are required for full internalization of the externality and application of the polluter pays principle.
Limited Tax Revenues
Tax revenues in developing countries are usually severely constrained by a narrow tax base, low
incomes, and limited tax collecting capacity. As a result of limited revenues and major infrastructural expenditures, developing countries tend to run sizable budget deficits. Hence, they can ill afford the costs of a large environmental bureaucracy. As a result, their monitoring and enforcement budgets are very limited and their infrastructure for collection treatment and disposal of waste grossly inadequate. At the same time, they face severe administrative and human resource constraints. Given these constraints, the opportunity cost of resources necessary to implement, monitor, and enforce end-of-the-pipe command and control regulations are significantly higher than those in developed countries. The limited experience with administrative regulations and the inadequate information available for setting standards may lead to overly ambitious or unenforceable regulations. In contrast, economic instruments, if properly selected, can have low enforcement costs and generate significant government revenues. In contrast to command and control regulations, which often lead to increases in a developing country's already excessive dependence on narrowly-based, highly distortionary taxes, economic instruments are corrective taxes that can lower this dependence by serving as alternative sources of revenue. The choice of specific economic instruments is significant in light of developing countries limited administrative and enforcement capability. For example, product taxes that use existing administrative structures may be preferable to emission charges or tradeable permits that require new collection mechanisms or additional administrative arrangements. Since product taxes are indirect instruments, they are not as efficient as pollution taxes, which directly attack the externality, the right instrument is determined by the balancing of the administrative cost savings against the efficiency losses. Lowincome
countries may thus opt for product taxes while middle income countries may choose pollution
charges or tradeable permits on account of greater administrative and charge collection capacity. Refundable deposits and performance bonds are also easily administered instruments, but may not be equally suited to the resource endowment of poor countries. The collection and return of residuals and waste is usually a labor-intensive activity, well-suited to the labor-surplus conditions of many poor countries, while the posting of a bond requires substantial capital which is usually scarce and costly in developing countries but more easily available and less costly in middle-income and newly industrializing economies.
Legal, Institutional, and Cultural Constraints
Where legal institutions are weak or not well developed, as is the case in many developing countries, instruments that rely on legal action for enforcement are unlikely to be effective. Examples include command and control regulations such as effluent standards or mandated technology that provides for fines, prosecution, closure, and imprisonment in case of non-compliance. Another class of instruments difficult to enforce under these circumstances is legal liability systems, used extensively in the United States. Moreover, because of a long backlog of cases in the courts of most countries, the threat of court action does not act as a deterrent or compliance incentive.