Many analyses of trade and environment have concluded that trade liberalization is Pareto improvement with Pigovian tax systems even when production and consumption processes bring non-market externalities. But in case of global forest issue there are many accusations that the trade liberalization of forest products has caused the degradation of forest sustainability. In this paper we try to explain the gap between the theory and the real situation from theoretical point of view. We will analyze comprehensively about free trade and forest sustainability by partial and general equilibrium analyses. Pigovian systems work well under the assumption of complete substitutivity of consumption between external effects and marketable commodities. If it were not satisfied, it is inevitable to levy import tariff or to take some domestic price support systems to guide the production point into sustainable forests. (C) 2007 Elsevier B.V. All rights reserved.