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Trade and the environment: what worries the developing countries?

As pressure intensifies for global action to protect the environment, increasing numbers of developing-country governments will be confronted with demands that they adopt policies more sensitive to the environment and more mindful of the preservation of nonrenewable resources. Many such demands will be articulated in the first instance by foreign environmental groups and governments - only later, perhaps, becoming a significant focus of attention for local nongovernmental organizations, political parties and interest groups. Environmental quality is not yet a high-profile public policy issue in most developing countries.

The rights of nations to determine their own policies and priorities are being challenged in the environmental sphere because of the global dimension of many of today's environmental concerns, whereby one nation's activities may be perceived as affecting environmental quality in other countries. Such "global commons" issues range from depletion of the ozone layer, to localized soil and water pollution problems in border areas.

Whether the issue is management of natural resources in a sustainable manner, reducing industrial pollution, or protecting biodiversity, developing countries are increasingly having to respond to demands from industrial countries for modified behavior. But it is one thing for developing countries to accept the proposition that safeguarding the environment is a shared responsibility, and quite another to subscribe uncritically to environmental priorities and solutions framed in industrial countries. Five basic principles suggest themselves as useful guidelines within which to conduct the discussion of how industrial and developing countries should interact on environmental issues.

First, the definition of environmental "externalities" entails a political process as well as a scientific one, and this should be recognized. Politics enter the picture because, as with all policy-making, there are few absolutes in environmental policy-making - trade-offs must be made among competing objectives. What this means is that differences will almost certainly exist across countries as to the desirability of attaining given environmental standards. And even if environmental objectives were broadly shared by different governments, it does not follow that the same priority would be attached to the attainment of these objectives. Such diversity makes international uniformity of standards a problematic objective of environmental policy. If large and powerful countries are not simply to impose their vision of appropriate environmental policy on the world, accommodation is required. Governments will have to take account of each others' needs, without unduly compromising their own priorities. This suggests a policy mode which seeks international agreement, based on exchange of scientific and economic information.

Why might developing countries espouse different, and often less stringent, environmental standards than industrial countrieg? Economists sometimes refer to environmental quality as a luxury good. No doubt this is an unnecessarily provocative statement of an important point - namely, that the demand for improved environmental quality tends to rise with income. Two factors underlie this relationship. First, in the process of growth and development that produces higher incomes, societies may impose severe Strains on the environment, via pollution and pressure on natural resources. This sparks a demand for a cleaner environment, for actions by governments to deal with negative environmental externalities. Second, rich people are less preoccupied than poor people with the imperatives of human existence. Poor societies are more geared to economic expansion, to the need to generate increased income to satisfy growing populations, leaving less room for concern about environmental quality in the future.

It does not follow from this line of argument that as long as societies attain economic growth, all will be well with the environment. Nor does it follow that environmental concerns should always be subordinated to growth objectives in developing countries - there are environmental problems that cannot wait. But if poor societies fail to improve the living standards of their people, persistent poverty may turn out to be the most aggravating and destructive of all environmental problems. In short, a relativist approach to environmental policy-making is called for, one which eschews uniformity as an unquestioned goal, and which recognizes divergent needs and priorities between nations at different stages of development.

Second, there in the question of equity. This is separate from the point about divergent environmental objectives and priorities among countries. It is that richer societies are better able to pay for environmental quality than poorer ones. The argument is that on equity grounds, industrial countries should pay more than developing countries for measures to improve the environment.

A related question is where the responsibility lies for the accumulated environmental ills perceived to be facing the planet. On the whole, industrial countries consume much larger amounts of environmental goods than developing countries. Thus, for example, with only sixteen percent of the world's population, industrial countries are responsible for more than fifty percent of total carbon dioxide emissions.(1) At the same time, however, on a per unit output basis, developing countries tend to be more profligate users of environmental resources. Should developing countries be pressured to improve their environmental "productivity" before industrial countries do more about theirs, considering the latter's overwhelming contribution to the global problem? Again, there appears to be a strong case for adopting a relativist approach. Considering the different magnitudes involved, Such an approach would also probably make the most sense in environmental terms.

Third, sound environmental policy should recognize that pollution tolerance levels are not necessarily the same in an locations. Topographical differences, together with pre-existing pollution levels, may affect these tolerance levels, and therefore the appropriate degree of control to be exercised over the consumption of environmental goods. Within countries, a range of regulations on polluting activities are set at the regional or sub-regional level, and take account of differing local absorptive capacities. Why should the same principle not apply internationally? Notwithstanding the point made earlier about interdependence in environmental matters, there should be appropriate leeway for nations to take their own decisions on these matters.

While the complete international harmonization of environmental policies and standards is not a sensible objective, there are nevertheless situations in which harmonization, or at least convergence occurs. In particular, national standards relating to product characteristics (product, as opposed to production, standards) gain international currency through trade. Producers in one country seeking to sell their goods in another will have to meet local standards. Over time, this process leads to similar standards. Some environmentalists worry that harmonization induced in this fashion, or more generally through international competition, will provoke downward harmonization inimical to environmental objectives. While this in possible, and can be guarded against through appropriate international commitments, he more likely outcome may well be that the higher standards of the richer countries will set the pace. These countries, after all, constitute the largest markets.

A related point worth making here is that the objective of harmonization is not always espoused for environmental reasons. In some countries, calls for harmonization of production processes have been based on competitive considerations. The argument made is that it is "unfair" for producers in a higher-standard country to be obliged to meet competition from countries with laxer production standards. An extreme version of this position is that the costs of environmental protection should be equalized across countries, irrespective of the possibility that the attainment of identical standards may carry differential costs according to location. These kinds of arguments have a strongly protectionist flavor. Environmental Policy should not be determined on competitive grounds.

The fourth point is linked to the third. It is that there should be recognition of the distinction between local and global environmental problems. Some environmentalists would reject this distinction, arguing that the globe is an integrated ecological system. While this may be strictly valid, surely there is a range of environmental issues where the links are sufficiently tenuous, and the global implications sufficiently slight, that for practical purposes international accountability should be ruled out? Acceptance of this principle should facilitate international agreement on what the important global issues are, and what should be done about them.

The fifth principle concerns the choice between unilateral decision-making, threats and punitive actions on the one hand, and negotiations to establish prior international commitments in the formulation of environmental policy on the other. International cooperation is far more effective, in achieving goals in a sustainable manner than coercion. There should, therefore, be a strong presumption in favor of international commitments over unilateralism. Trade sanctions or similar actions against other countries, taken in the name, of environmental protection, should be measures of last resort. Ultimately, this boils down to a question of emphasis, but if the emphasis is not on cooperation, it will be much more difficult to secure satisfactory environmental outcomes. International cooperation may not be as hard to achieve as sometimes feared, if targets are appropriately set. In particular, there is no need in the first instance to involve more than a handful of countries to address most of the problems afflicting the global commons.

In conclusion, acceptance of the five principles spelled out above - that international uniformity of environmental objectives and priorities should neither be assumed nor imposed, that equity and past actions demand a nonuniform international distribution of the burden of environmental protection, that differences in local absorptive capacities should be factored into environmental policy-making, that there is a meaningful working distinction to be made between local and global environmental problems, and that international cooperation should take primacy over unilateral determinations and actions - could establish a solid basis on which to build a consensus on international environmental policy in which developing countries might share.

(1) See Ishac Diwan & Nemat Shafik, Investment, Technology and the Global Environment: Towards International Agreement in a World of Disparities, in International Trade and the Environment 263-85 (World Bank Discussion Papers No. 159, Patrick Low ed., 1991).
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Title Annotation:Trade and the Environment
Author:Low, Patrick
Publication:Environmental Law
Date:Apr 1, 1993
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