Trade liberalization sample essay
Environmentalists argue that trade liberalization harms the environment. The decisions of the World Trade Organization (WTO), in particular, have been the subject of much criticism.Three of the main assertions discussed are whether trade liberalization leads to a “race to the bottom” in environmental standards; trade liberalization conflicts with morally-conscious environmental policies; and, finally, trade liberalization encourages trade in products that create global pollution or “pollution havens”.
If economists ruled the world, there would be no need for a World Trade Organization. The economist’s case for free trade is essentially a unilateral case – that is, it says that a country serves its own interests by pursuing free trade regardless of what other countries may do. There would be no need for trade treaties: global free trade would emerge spontaneously from the unrestricted pursuit of national interest.
Fortunately or unfortunately, however, the world is not ruled by economists. The compelling economic case for unilateral free trade carries hardly any weight among people who really matter. If we nonetheless have a fairly liberal world trading system, it is only because countries have been persuaded to open their markets in return for comparable market-opening on the part of their trading partners.
The problem free traders face is not that their theory has dropped them into Wonderland, but that political pragmatism requires them to imagine themselves on the wrong side of the looking glass. There is no inconsistency or ambiguity in the economic case for free trade; but policy-oriented economists must deal with a world that does not understand or accept that case. Anyone who has tried to make sense of international trade negotiations eventually realizes that they can only be understood by realizing that they are a game scored according to mercantilist rules, in which an increase in exports – no matter how expensive to produce in terms of other opportunities foregone – is a victory, and an increase in imports – no matter how many resources it releases for other uses – is a defeat.
The implicit mercantilist theory that underlies trade negotiations does not make sense on any level, indeed is inconsistent with simple adding-up constraints; but it nonetheless governs actual policy. The economist who wants to influence that policy, as opposed to merely jeering at its foolishness, must not forget that the economic theory underlying trade negotiations is nonsense – but he must also be willing to think as the negotiators think, accepting for the sake of argument their view of the world.
The WTO Secretariat’s Trade and Environment Report, released on 14 October 1999, addressed the economic and political economy dimensions of the interface between trade and environment. The report argued that there is no basis for the sweeping generalizations that are often heard in the public debate, arguing that trade is either good for the environment, or bad for the environment. The real world linkages are a little bit of both, or a shade of grey. “Win-win” outcomes can be assured through well designed policies in both the trade and environmental fields.
“Every WTO Member Governments supports open trade because it leads to higher living standards for working families which in turn leads to a cleaner environment. This report underscores that trade and environment need not be contradictory but can indeed be complementary,” said WTO Director-General, Mike Moore.
Among the questions the report seeks to answer are the following: is economic integration a threat to the environment? Does trade undermine the regulatory efforts of governments to control pollution and resource degradation? How can we ensure that economic growth driven by trade will help us to move towards a sustainable use of the world’s environmental resources?
Some of the main findings of the report include the following:
– Most environmental problems result from polluting production processes, certain kinds of consumption, and the disposal of waste products – trade as such is rarely the root cause of environmental degradation, except for the pollution associated with transportation of goods;
– Environmental degradation occurs because producers and consumers are not always required to pay for the costs of their actions;
– Environmental degradation is sometimes accentuated by policy failures, including subsidies to polluting and resource-degrading activities – such as subsidies to agriculture, fishing and energy;
– Trade would unambiguously raise welfare if proper environmental policies were in place;
– Trade barriers generally make for poor environmental policy;
– Not all environmental standards should necessarily be harmonized across countries;
– The competiveness effects of environmental regulations are minor for most industries;
– A good environmental profile is often more of an asset for a firm than a liability in the international market-place, notwithstanding somewhat higher production costs;
– Little evidence bears out the claim that polluting industries tend to migrate from developed to developing countries to reduce environmental compliance costs;
– Yet, environmental measures are sometime defeated because of concerns about competitiveness, suggesting a need for improved international cooperation on environmental issues;
– Economic growth, driven by trade, may be part of the solution to environmental degradation, but it is not sufficient by itself to improve environmental quality – higher incomes must be translated into higher environmental standards;
– And not all kinds of economic growth are equally benign for the environment;
– Public accountability and good governance are essential to good environmental policy, including at the international level;
– Effective international cooperation is essential to protect the environment, especially in respect of transboundary and global environmental challenges.
– The cooperative model of the WTO, based on legal rights and obligations, could potentially serve as a model for a new global architecture of environmental cooperation.
– Meanwhile, even within its current mandate, the WTO could do a few important things for the environment. The most obvious contribution would be to address remaining trade barriers on environmental goods and services in order to reduce the costs of investing in clean production technologies and environmental management systems. Another contribution would be to seek reductions in government subsidies that harm the environment, including energy, agriculture and fishing subsidies.
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