The author contrasts the economic principle of specialization found in trade theory with the ecological principle of diversification that underlies the ecosystem approach to natural resource use. He argues that current ecosystem decline is a consequence of the over-extension of the principle of specialization from the factory setting to nature. When the specialization principle is applied wholeheartedly to natural systems to speed up their delivery of desired commercial products it leads to ecosystem Simplification, loss of integrity and stress. This occurs, for example, in modern approaches to forest management, when clearcutting and replanting with genetically modified seeds Occurs with heavy inputs of fertilizers, herbicides and pesticides. What is required is a re-balancing of the application Of the principle of specialization with the principle of diversification, as occurs when forests are managed according to an ecosystem(-based) approach. This re-balancing occurs at the level of production, however, not at the level of trade. Consequently, the focus of environmental reform must be production policy, not trade policy. (C) 2000 Elsevier Science B.V.