Trade and envitonment

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Trade and environment
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Trade - separating fact from fiction |
Is trade good or bad for the environment? |
| Production and trade obviously affect the environment, and just as obviously some of these impacts are negative. The issue is not whether trade damages the environment – it does, as do many other human activities. |
But tradecan also lead to beneficial impacts on the environment by allowing environmental goods and services to be shared more widely. The real question is whether the situation would be better or worse under a more liberal trade regime.Open markets can improve resource allocation, so that goods are produced where it is most environmentally (as well as economically) efficient to do so, even when shipped todistant markets. Consuming locally produced goods is not always more environmentally friendly than buying imports This is the case, for example, for dairy, sheep meat, and some horticulture products produced in New Zealand for UK markets.Increased trade can support economic growth, development and social welfare, thereby contributing to a greater capacity to manage the environment moreeffectively. Studies from a decade or so ago concluded that for some pollutants, emissions rise as countries advance from low to middle-level per-capita incomes and then fall as countries attain higher incomes. Water pollution falls by a very significant amount as per-capita income rises, with the steepest decline occurring before a country reaches middle-income status.More recently, a number of developingcountries have adopted tougher pollution controls than OECD countries had in place when they were at the same levels of development. Drawing on knowledge of the links between pollution reduction, improved health, and increased productivity, many developing countries have concluded that the benefits of pollution control outweigh its costs.They are finding innovative ways to address pollution,involving the use of pollution taxes or charges, greater transparency - successful in reducing pollution in Indonesia and the Philippines - and the creation of new industrial parks for heavy industries, such as steel and chemicals, that achieve high levels of materials recovery, recycling and waste treatment. Openness to trade and investment can provide a country with the incentive to adopt, andimprove access to, new environmental technologies. As a country becomes more integrated with the world economy, its export sector becomes more exposed to environmental requirements imposed by the leading importers. Changes needed to meet these requirements, in turn, flow backwards along the supply chain, stimulating the use of cleaner production processes and technologies.The early adoption ofenvironmental regulations has been helped in many ways including by the spread of bilateral and regional trade agreements between developed and developing countries which typically provide resources and institutions for information exchange and capacity building, and encourage the less economically developed partner to strengthen its environmental regulations. Are open markets a “race to thebottom”? The “pollution haven” argument is essentially that open markets for trade and investment encourage countries to retain weak environmental regulations, in order to improve their international competitiveness in product markets or to attract foreign direct investment. For this to occur, the cost of meeting environmental regulations would have to be significant enough to counteract the other factors thatdetermine international competitiveness and that influence investment decisions: access to labour, raw materials, transport infrastructure, intellectual-property rights, and so on.Numerous analyses have shown that the cost of avoiding or treating most pollutants adds only a few percentage points to total production costs; in brief, there is little that countries can gain from becoming pollution...