Effect of trade liberalisation on the environment

Question

Please tell me what is trade liberalization and its effect on Environment with examples?

Answer

Trade liberalisation can be defined as a move towards free trade through the reduction of tariff and other barriers, and is generally perceived as the major force behind globalisation. There is a debate about how trade affects the environment. Whilst environmentalists argue that trade liberalisation is bad for the environment, free traders posit that it is actually good for the environment.

One central issue in the discussion is the pollution-haven hypothesis, which suggests that less stringent environmental standards in developing countries will give them a comparative advantage in pollution intensive goods. For example, increased production of commodities such as cotton and vegetables in developing countries (such as Brazil, Pakistan and Mexico) can have potential negative impacts on soil, water, landscape and biodiversity due to export related expansion and use of pesticides in these developing countries. Increased cotton production due to export related expansion leads to problems of habitat destruction and fragmentation in West and Central Africa and Brazil.

Furthermore, export related expansion can lead to increased pollution and unsustainable consumption of natural resources. For example, greenhouse emissions also increase due to increased vegetable trade and this is a global issue as opposed to just affecting developing nations.

From the free traders’ perspective, it is believed that countries will utilize their comparative advantage and specialize in the production of goods and services in which they are most efficient, thus reducing the possible negative impacts on the environment.

Admittedly, there are increasing concerns over the potential negative impacts of trade liberalization on the environment. It should be noted that, environmental risk or potential varies by commodity and location. These variations depend on environmental, climatic and regulatory conditions in the producing country, extent to which methods of production (and hence environment impacts) vary by country, and pattern of trade.

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