September 2007
Trade Liberalisation And The Environment
Over the next two months, the author is hoping to present both sides of the argument relating to the controversial topic of trade liberalisation and the environment.
This month, he hopes to examine a few arguments as to why trade liberalisation may improve environmental protection, lead to the better enforcement of laws and is generally a good thing for sustainable development. Next month’s article will present some of the opposing views on this issue.
On a global scale, it is apparent that countries with higher national incomes have stronger environmental protections and lower rates of pollution than less developed nations. This protection has been achieved by liberalised trade, as higher incomes and economic growth has made it possible for countries to enact and upgrade environmental laws whilst remaining competitive.
Indeed liberalised trade helps improve sustainable development and environmental protection through the lowering or reduction of barriers to trade and the sale of green technologies to developing countries. Moreover, non-polluting technology inputs may have positive externalities in terns of sustainable human development. For example, the use of solar power and recycling of water has health benefits for human populations.
Perhaps one of the strongest arguments is made by David Vogel, Professor at the Haas School of Business. Citing the "California effect", he notes the state’s role in spearheading environmental regulation and promoting a regulatory "race to the top."
Vogel elucidates in his book, Trading Up: Consumer and Environmental Regulation in a Global Economy:
"When rich political jurisdictions with large domestic markets such as California, the United States and Germany enact stricter product standards," he said, "their trading partners are forced to meet those standards in order to maintain their export markets. This, in turn, often encourages consumer or environmental organizations in the exporting country to demand similar standards for products sold in their domestic markets -- a demand that internationally oriented producers are now more willing to support since their exports to greener markets already meet them."
Using the example of stringent Californian car emission standards that became a model for the federal government, he turns to the European Union:
"The willingness of Germany's automobile manufacturers to support stricter EU standards was in part due to their experience in producing vehicles for the American market. Germany's stronger standards have subsequently been adopted by other European nations."
The US Department of Commerce also advocates the benefits of trade liberalisation in promoting sustainable development, stating that: "contrary to popular myths", trade agreements do not prevent national governments from taking steps to protect the environment.
Promoting recent World Trade Organization (WTO) agreements, officials pointed to the fact that North American Free Trade Agreement (NAFTA) and the more recently negotiated free trade agreements take environmental and health and safety concerns into consideration and "recognize the right of all governments to take measures to protect the environment. Trade agreements only require that such measures must be applied without discrimination".
Officials go on to make unequivocal representations as to the direct impact of tying trade with environmental aid:
"Recently negotiated free trade agreements include explicit safeguards for environmental protection. U.S. free trade agreements with Singapore, Chile, Australia, Morocco, Bahrain and Central America require the parties to (1) effectively enforce environmental laws, (2) ensure that they do not weaken their environmental laws to encourage trade or investment, and (3) ensure that violations of their environmental laws are subject to sanctions by legal procedure."
Thus using benevolent economic soft power in conjunction with market forces, trade liberalisation appears to have provided a great service to the cause of environmentalism and sustainable development. Professor Vogel affirms this rough assessment, stating:
"The central thrust of my book is that if you look over the history of the last 30 to 40 years, you get both -- a steady liberalization of the global economy and a steady strengthening of regulatory standards."
Next week: A few thoughts from the other side of the fence.
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