Trade Policy and the Environment

It is a legal issue to determine whether environmental issues should be addressed in the trade policy. Trade and production has an obvious impact on the environment and most of them negatively impacts the environment. In Canada the increasing business opportunities are facing the issues related to the impact of trade in the environment. Therefore, trade policies should be drafted in such a way that it protects the environment. In order to protect the environment from the damages of trades, a strict trade policy regulating the environmental harms should be maintained to ensure the protection of the environment. Such a policy can prove to be beneficiary for the environment as well as the man kind.

In modern times, the impact of trade activities over the environment has become a serious concern. The trade economists have observed that trade opening affects the environment (Panayotou, 2016) in the countries like Canada where business opportunities are high. Trade liberalisation has impacted the environment by the scale, techniques and composition of trade. A conceptual framework was created and applied in the North American Free Trade Agreement, which helps in study the link between trade activities and environmental change (Low, 2016). Trade opening affects greenhouse gas emission as it involves energy use, which eventually leads to more greenhouse gas emission. However, trade opening may result in innovation of some techniques to improve energy efficiency. New techniques are introduced to regulate and control the greenhouse gas emission. Lastly, composition effect of trade liberalisation would result in less greenhouse gas emission where the sectors which are expending are likely produce greenhouse gas than those contracting sectors. In this aspect, the reformulation of Gasoline Rule needs to be highlighted. Under the US Clean Air Act, the gasoline rule, regulates the emission effects of gasoline, with an objective to reduce the air pollution. It creates a figure for gasoline, using various methods for imported and domestic gasoline.  It was found that the Gasoline Rule was more favourable to the domestic gasoline than the imported gasoline violating the General Agreement on Tariffs and Trade.

On the other hand, trade has resulted into economic growth of countries and thus helping them to promote environmental up gradation. The continued growth of economy has helped in adopting the needful measures to take sustainable environmental development (Ciesin.org. 2018). The developed countries are willing to pay for improving the environmental quality.

International environmental agreements, to which Canada is a party, address the international environmental problems and applies the polluter-pays-principle as over the world. Despite that, international environmental agreements are difficult to sustain. It has been observed that lower priorities has been given to some countries to solve an environmental problem than the other countries for different risk attitudes and preferences (Copeland & Taylor, 2013). In fact, countries sometimes disagree with the scientific evidence of environmental issues as it is observed in the recent climate change discussion. The per capita differences in countries implies a different evaluation of environment irrespective of identical risk attitudes and preferences.

Environmental Impacts of Trade

There are many countries that grow or produce products for domestic sale and use purpose as well as for the purpose of exporting. While growing cotton has led farmers and producers to increase their profitability and the countries to gain an unexpected economic revenue, it has caused some serious environmental damages. Therefore, it is extremely required to adopt an efficient trade practice to avoid land degradation and soil erosion.  Additionally the cross border trade activities has sometimes caused to certain environmental damages that cannot be recovered. Trade accidents occur as a part of the trade activities, which harms the environment in a serious way. For example, in the year 2010, the remarkable environmental disaster happened that is known as the oil spill in the Gulf of Mexico. An oilrig, known as the Deep Water Horizon exploded and continued to burn for two days and sunk in the Gulf of Mexico. The damages which arise out of it cannot be estimated or recovered.

At the same time, the environmental concern and trade policy cannot be connected directly to improve the environmental condition and enhance the protection. The strict environment standards provided by the government are not always fair to the farmers as they are not able to bear the burden to comply with the standards. The imposition of taxes and duties on imports and exports have become so stringent that the lower economic group are left to suffer. The environmental protection costs differ in different countries though the required environmental regulatory treatment is almost the same in every countries (Aklin, 2016). Eventually the General agreement on Tariffs and Trade and WTO agreement does not contain all the detailed provisions of the relationship of the trade and environment (Wto.org. 2018). The Tuna-Dolphin case was one of the famous case where an embargo was imposed on the import of the Tuna fish caught with the use of such a fishing techniques that endangered the lives of dolphins. A ban was imposed by USA upon such fishing methods. More than 200 Multilateral Environment Agreements (MEAs) have been signed since the first UN conference pertaining to environment in 1972. Several treaties and agreements like UN Framework Convention on Climate Change (UNFCCC) have been recognised universally while the others have been accepted in some regions and smaller group of countries for its specifications. These MEAs include various trade measures in their guidelines, which strives to direct the member states to adopt precautionary measure to safeguard the environment that involves the flora and fauna of a region. Regulating bodies are making these socially progressive agreements and conventions popular in global scenario when it comes to framing policy pertaining to the environment. However, this might have a conflict with the trade rules of the WTO (Morin, Pauwelyn, & Hollway, 2017). The MEAs include different types of restrictions on trade and for making trade policies keeping environmental concerns in mind. Restrictions like banning the trade of particular substance that is polluting the environment. MEAs may also require incorporation of measures that may have a direct or indirect impact on trade, like changes on taxes, requirement of prior consent to carry out certain operations, variation in labelling, etcetera. While some MEAs are made particularly for regulating the trade practices of certain commodities of a region, like the Convention on Trade in Endangered Species (CITES) controls the specific trades that require the movement of flora and fauna that are on the verge of extinction. Restrictions in disguise of penalties and punishments are also imposed by way of these MEAs. Treaties, agreements and conventions use trade restriction as an instrument to back their intentions and purpose to protect the environment. Like, the Montreal Protocol was signed in relation to the issues of ozone layer depletion, which required restrictive use of some chemical substances that was harmful for Stratosphere. By way of this treaty, the ‘non-parties’ to the protocol were also made to oblige the guidelines (Brack, 2017). Such stringent authority of the MEAs made it popular for its ability to address the particular environmental harms, to promote compliance and its mission to encourage participation of more countries to battle environmental issues.

As a part of the fact, it can be argued that the biggest environmental benefit for trades are that, it concentrates on polluting activities by permitting pollution havens, in those area where least harm is caused. Trade activities leads to race to the bottom with regards to the environmental regulatory policies as the firms are likely to cut expenses in order to compete with the foreign market (Ahmed, Shahbaz, & Kyophilavong, 2016). Growths in income, has helped the countries like Canada to combat with the environmental problems. However it indirectly leads to endanger or extinction of various species and animals.

It can be concluded by observing the positive and negative impacts of the trade in the environment that it has several benefits offset by other harms to the world. Following the current environmental changes, sustainable care should be taken through the trade policy, making the trade and environment protection to be consistent with each other. The environmental issues may arise in the importing countries, exporting countries or at the supply level. There are obviously some positive effects of trade on environment. As trade may promote effective allocation of resources throughout the world and contribute to enhance the standard of living of the people and the environment by expanding the production. Trade can have a positive effect on the environment by implementing an effective policy reduce insufficient use of the resources. Additionally, trade generates financial resources that might be necessary for managing the environmental damages. Whereas, in the absence of an appropriate environmental policy, there may be negative effects on the environment that are related with trade in terms of increased transport, and international trading of hazardous substances. In that cases, even indirect effects can result from a growth in the use of natural resources, pollutants emissions and wastes related with the expanding economic activities. In addition to this, environmental degradation can be resulted from trade activities by weakening some economic activities. Likewise, there are some environmental policy measures, for example, eco-labelling and recycling requirements that have trade-restrictive effects. However, both are interdependent and should be given the appropriate attention to avoid any future danger to the world.

References

Ahmed, K., Shahbaz, M., & Kyophilavong, P. (2016). Revisiting the emissions-energy-trade nexus: evidence from the newly industrializing countries. Environmental Science and Pollution Research, 23(8), 7676-7691.

Aklin, M. (2016). Re-exploring the trade and environment nexus through the diffusion of pollution. Environmental and Resource Economics, 64(4), 663-682.

Brack, D. (2017). International trade and the Montreal Protocol. Routledge.

Ciesin.org. (2018). Retrieved from https://www.ciesin.org/docs/008-067/chpt1.html

Copeland, B. R., & Taylor, M. S. (2013). Trade and the environment: Theory and evidence. Princeton University Press.

General Agreement on Tariffs and Trade

Low, P. (2016). International trade and the environment. UNISIA, (30), 95-99.

Morin, J. F., Pauwelyn, J., & Hollway, J. (2017). The trade regime as a complex adaptive system: exploration and exploitation of environmental norms in trade agreements. Journal of International Economic Law, 20(2), 365-390.

Panayotou, T. (2016). Economic growth and the environment. The environment in anthropology, 140-148.

US Clean Air Act

Wto.org. (2018). Retrieved from https://www.wto.org/english/tratop_e/envir_e/envir_e.htm