The Uruguay Round trade agreement includes a new programme of work to examine the relationship between trade and environmental policies. Environmental groups remain suspicious that trade liberalisation will undermine or discourage improvements in environmental standards. In this paper, the use of trade measures to protect producers from competition with goods produced under less stringent environmental standards is examined. It is shown that such measures will not improve national welfare, and may undermine environmental policies. Failure of a government to enact appropriate environmental policies constitutes an implicit subsidy, and equity considerations suggest that this will continue to create pressure for changes to the GATT to protect producers who are meeting higher standards.