Trade Liberalization & Environmentalism: Should They Really Be At Odds?
The impact of trade liberalization on the environment and climate change at large has been one of the most crucial debates in the trade policy arena since the 20th century. Although the two concepts were treated as independent until the early 1990s, they have now become an interlinked phenomenon that is widely researched by scholars around the world. Particularly, the relationship between free trade and the environment initiated in the 1990s, after the negotiations over the North Atlantic Free Trade Agreement (NAFTA) and the Uruguay round of the General Agreement on Tariffs and Trade (GATT), both of which were held during an era of increasing environmental awareness such as the Climate Change Convention (1994) and the Convention on Biological Diversity (1992).
Firstly, environmentalists argue that free trade is harmful for the environment, because countries that have lax environmental regulations end up having a comparative advantage in the global economy. This argument is associated with the “Pollution-Haven hypothesis”, which indicates that trade liberalization permits firms to “take advantage of cross-country differences on environmental standards, and that reduction of trade barriers allows pollution-intensive industries to relocate to countries with weaker environmental regulations” (Zhang and Yang, 2007). For example, environmentalists in the early nineties argued that the creation of NAFTA would lead to an environmental catastrophe in Mexico, pointing towards the Maquiladora zone, where they witnessed a concentration of industry due to trade with the US, which resulted in drastic impacts on the environment. Secondly, environmentalists also believe that if relocating industries to “pollution havens” becomes a mainstream practice, many countries will then use it as a justification for lowering environmental standards in their own countries in order to become more “business friendly” (Esty 1994).
The wider consequences that the arguments above entail include environmental degradation and loss of biodiversity on a large scale, worsening climate change challenges around the world. This is because the more goods that are transported, the more hazardous wastes and toxic materials are generated, thus increasing environmental risks. Similarly, such goods may also end up being dumped in countries that lack the technical or administrative means to properly dispose them off. Trade also encourages the over-exploitation of biodiversity that brings it to the brink of extinction. For example, trade in ivory poses huge threats to species such as elephants, whereas bad air quality in China is mostly attributed to the export-led growth, and lastly, unsustainable deforestation rates in tropical rainforests such as the Amazon jungle, all of which contribute to the increased instances of extreme climate events (Copeland and Taylor, 2003).
Despite the claims made against trade liberalization, liberals focus on the “gains” from free trade which, in their opinion, can actually lead to better confrontation of environmental challenges. This is because trade liberalization allows countries to utilise their comparative advantage and specialize in the manufacturing of goods and services in which they are most efficient (Brack, 1995). Thus, countries can achieve allocative efficiency, reducing the unsustainable consumption of natural resources. Moreover, free trade can facilitate the transfer of “environmentally-friendly” technology from one country to the others, advancing efforts towards mitigation and adaption to climate change. Controversially, it is also believed that countries who are leading the environmental efforts by building strict environmental regulations and legislations can impose trade sanctions on countries that continue to show indifference towards environmental challenges. However, this brings in the question of whether such a practice would undermine a state’s sovereignty, thus making it politically unethical. In Tuna-Dolphin I (1991), for example, the GATT Panel passed a rule that stopped states from violating the sovereignty of another state as a way of promoting environmental policies.
Considering the aforementioned arguments, one could conclude that free trade actually supports environmental protection. For example, the conclusion of the Uruguay Round led to the establishment of the the Committee on Trade and Environment (CTE) whose role was to “examine the relationship between trade measures and environmental measures in promoting sustainable development and the environmental effects of trade liberalization” (Anderson 1996). However, despite of the efforts made towards making multilateral trade more sensitive towards the environment, environmentalists insist that the rules indicated by the GATT Article XX(g) are simply inadequate. The Shrimp-Turtle (9) case, was one example of how challenging it is to adopt an environmental protection measure under this article.
More recently, we have witnessed the adoption of the Sustainable Development Goals (SDGs), as well as the advancements of international law, both of which are highly concerned with the protection of the environment, and place a special importance on economic development being sustainable and environmentally conscious. With this in mind, one could argue that the involvement of sustainable development within trade agreements is an attempt to constrict free trade by enforcing legally binding obligations on states concerning the protection of the environment. However, one could also argue that such obligations are not meant to stop free trade altogether, but rather, a way to make free trade more sustainable which, in the long term, is actually better for free trade, because if climate change is allowed to accelerate at the same rate fifty or hundred years into the future, there will be no resources left to practise free trade to begin with.
In conclusion, while free trade might appear to be at odds with tackling climate change, it ultimately has no other choice but to cooperate with environmentalists, as winning the fight against climate change is a win for all, including free trade. It is also worth noting that the discourse between free trade advocates and environmentalists have contributed to the creation of countless innovations to the environmental aspects of the multilateral trading system. Moreover, it has simultaneously lead to the introduction of the concept of sustainable development, which is a concept that has successfully bridged the gaps between economic development and environmental management, which could be seen as a convergence of the interests of free trade and environmental protection, thus largely reducing the odds between them.
