Saturday, February 13, 2010

Global Trade and Sustainable Development

Global Trade and Sustainable Development

Currently, the dominant mode of production in the contemporary society is based on the principle of neo-classical economic and liberal theories. In terms of arrangement, Liberal theories conclude that international trade conducted by private actors free of government control will maximize global welfare.[i] In a broader term, the economics is likely to be based on growth accumulation, and short term profit.

Many dilemmas stem from the sizable effect that international trade has on the distribution of income and wealth among individuals, groups and nations. Simply put, some gain material benefits from trade while other lose.[ii] The trade policy often protects or promotes one industry or sector of the economy at the expense of others. They presents dilemma for nations, no policy can avoid some of trade’s negative consequences without sacrificing some of its benefits. One of the worst sector hit by the economy is the environment.

While a few people have attained material abundance through industrialisation and economic growth, resource depletion and environmental degradation now pose an immediate threat to many, and affect the future of us all. Takeda stated that the Brundtland Report (WCED 1987) and Limit to Growth Report, agreed that economic activity was causing pollution, using up scarce resources, disturbing ecosystems and destroying habitats.[iii]

To address the negative impact of the economy towards the environment, the concept of sustainable development was introduced. Sustainable development concepts try to reconcile the tension between ecology and economy, to achieve sound environmental planning without sacrificing economic and social improvement. Thus, based on the Brundtland commission, Sustainable Development is development that ‘meets the needs of the presents without compromising the ability of future generations to meet their own needs.’[iv]

Chasek sees that Trade liberalization has indirect effects on sustainable development, which there are four indirect mechanism: Scale, composition, technique and regulatory.[v]

  1. Scale effect; on expansion of economic activity, intensification or extensification of the industry will likely to gave more effect to the environment.
  2. Composition effect; when countries specialize in the sectors where they enjoy a comparative advantage.
  3. Technique effects; change in resource extraction and production technologies can lead to a decline in pollution.
  4. Regulatory effects; of economic integration which can create a development friendly policies and institutions or the way around.

I would like to emphasize more on the regulatory effects. Liberalization drives the demand for greater consumption of natural resources, pressuring to dismantle environmental regulations. An institution that have a great power in regulatory effect of trade is the World Trade Organization (WTO). The goal of WTO is the harmonization of international standards for trade in goods and services. If the WTO panel rules against a country it has to make the recommended change within a prescribed time or face financial penalties or trade sanctions.[vi]. WTO became the agency to dismantle the environment regulations. With their principle of Most Favour Nations and the Dispute Settlement Mechanism, the WTO charge green policy that was perceive as blocking the free trade. For example is the Tuna-Dolphin case and the Shrimp-Turtle Case.[vii]

Thus, the political will of the state and other governance institutions is needed. Batiuk, echoed similar sentiment by saying reforms and new institutions for trade can succed depends on the willingness of the more developed countries and actors, to look beyond immediate profit and invest in the healthy and stability of the less developed countries.[viii]

[i] Moon, Bruce.E , “Free Trade Vs. Protectionism: Values and Controversies,”p.95, in Snarr & Snarr, 2008, Introducing Global Issues, Lynne Rienner Publishers, London.

[ii] Ibid, p.102.

[iii] Takeda, Louise, ”Political Ecological Economics: an Emerging Transdiciplinary approach to sustainability” in The Interdisciplinary Journal of International Studies, No. 1, pp. 41-57. Available at [] (accessed at 23 Nov 2009)

[iv] Chasek, Pamela, E, “Sustainable Development,”p.244, in Snarr & Snarr, 2008, Introducing Global Issues, Lynne Rienner Publishers, London.

[v] Ibid, p.254

[vi] Chasek, Pamela, E, “Sustainable Development,”p.255, in Snarr & Snarr, 2008, Introducing Global Issues, Lynne Rienner Publishers, London.

[viii] Batiuk, Mary Ellen, “The Political Economy of Development,”p.244, in Snarr & Snarr, 2008, Introducing Global Issues, Lynne Rienner Publishers, London.

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