By Johnny Kallay*
Globalization, through trade and investment, can be analyzed from two different perspectives, (1) from the permission to nations to achieve economic growth with some level of environmental quality, or (2) from the degradation of environmental quality with a certain level of economic development. Its complexity is such that it does not become totally unfavorable to the environment and not entirely favorable to it either. The truth is that the most of us crave clean environment and economic growth, and this would be the perfect combination and perhaps the real interpretation of sustainable development.
Opponents of globalization in general fear that unbridled economic growth, driven by free international trade, damages the environment causing pollution and consuming natural resources to exhaustion, and argue that a slower pace of foreign trade may be better to protect the environment. On the other hand, many argue that free trade combined with technological advances is the best tool to solve environmental problems and to lift people out of poverty, even more than major regulations. Whereas, from nations perspectives, sustainable development have clearly three complementary objectives: a protected and preserved environment through the good use of natural resources and their protection, robust foreign trade for revenue generation and solid economic growth for social well-being. The right balance between environmental quality, foreign trade and economic development is far to be an easy balance to get. The impact of foreign trade in GDP generation is much more easily measured than its impact on the environment as its several aspects are impossible to fit in a single measure.
A larger scale of production that leads directly to more pollution and other environmental degradation is automatically observed paralleling economic growth, and even in a GDP growing scenario there would be a tendency to get favorable changes in the earnings composition and production techniques, but the question remains whether these favorable changes would overcome the initial environmental damage that might have occurred. To solve such equation, in States with solid and established institutions, regulations are created in a national level, but the problems that cross borders are still a task to be dealt with. There is a need for international regulations empowering international institutions to act but, in this case, conflicts with the demand for national sovereignty would still promptly pop-up.
From an economic point of view the environment is affected in three ways such as, (1) the scale of economic activity – more gains generate more production and therefore more possible environmental degradation and pollution, (2) the composition of economic activity – agriculture, industry and service, has a direct influence on the impact on the environment depending to the intensity of each of these three sectors, (3) economic activities technics themselves – whether power generation comes from non-renewable sources or from renewable ones, as in the energy field for example. These three ways are directly determined by the way nations interact with each other, but the question persists whether globalization leads to environmental standards or whether such environmental standards leads to globalization, or both. Anyhow, international cooperation through multilateralism is fundamental and that means nations interacting under certain rules in multilateral negotiations and monitored by multilateral institutions.
Currently the WTO (World Trade Organization), an institution that seeks free trade standardization, aims not only at international trade regulation but also at a proper use of the planet’s resources, protecting the environment through agreements on product standards, food safety, intellectual property protection, etc. encouraging and contributing to sustainable development, increasing social welfare and reducing poverty, targeting peace and stability. However, products consumption, in countries other than their origin, can ignore the environmental impact caused by their methods of production or processes. By the end of the twentieth century, consumer awareness on the global environmental externalities is increasingly influencing, positively or negatively, the consumption of such products showing that foreign trade can be an effective way for environmental protection. Consumers are realizing their power to accept or reject products, and the Dolphin / Tuna case between the US and Mexico in 1991 is a good example of that, proving that policies can promote foreign trade while preserving the environment.
It is also true that the arrival of an external competitor into a country or region would stimulate local businesses to ask local authorities to soften regulations in order to hold environmental costs on repair and conservation, to keep their price competitiveness. On the other hand, this foreign trade can encourage technological and managerial innovation, benefitting both environment and economic progress.
When it comes to environmental problems that cross borders causing climate change, species extinction, destruction of the ozone layer, acid rain, pollution, etc., countries are unable to solve them on their own. Only cooperation through multilateral institutions and foreign trade agreements can deliver solutions to preserve global environment. Although the creation of regulations on the methods of production has been evolving positively over the past decades, the international society needs to put more efforts on them to get concise results sooner than later. Foreign trade development would thus be more of an ally than a threat to the environment.
Globalization 101. Are international trade and protection of the environment enemies? On: http://www.globalization101.org/are-international-trade-and-protection-of-the-environment-enemies/. Access: May 31, 2014.
The National Bureau of Economic Research. (2003). The environment and globalization. Jeffrey A. Frankel. On: http://www.nber.org/papers/w10090.pdf?new_window=1. Access: May 31, 2014.
World Trade Organization. What is the WTO? About the WTO – a statement by former General Director Pascal Lamy. On: http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htm. Access: June 1, 2014.
* Johnny Kallay has a bachelor’s degree in Social Communication from ESPM – School of Advertising and Marketing – São Paulo. He is also postgraduated in International Relations from FGV – Getulio Vargas Foundation – São Paulo. Areas of interest: geopolitics, global security, energy and global economic development.