Trade agreements only partly shift environmental burden onto poorer countries

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 (Image: Pixabay CC0)
(Image: Pixabay CC0)

Is trade liberalisation shifting environmental burden from industrialised countries to poorer ones’ This question was investigated by a research team at ETH Zurich led by Thomas Bernauer. In particular, they analysed whether, and if so how, commerce driven by free trade agreements is transferring environmental impacts from industrialised countries to poorer ones.

As economic globalisation - and free trade in particular - progress, the associated environmental burden may tend to be transferred abroad. Researchers working on the National Research Programme "Sustainable Economy: resource-friendly, future-oriented, innovative" (NRP 73) are investigating the environmental impacts of production and consumption. They are also elucidating the influence of trade policy and political institutions on these environmental impacts.

Partial proof of trade-related environmental impact

The researchers investigated the effect of global trade on environmental impact in 183 countries between 1987 and 2013 using the World Bank’s "Country and Lending Groups" classification. The results confirm that free trade or preferential trade agreements lead to environmental impacts being partially shifted to poorer countries, for example as a result of raw materials extraction or forest clearance. However, the agreements do not automatically mean that industrialised nations import and consume larger quantities of these impacts in the form of products. Even today, the transfer of technological innovations and creation of environmental standards are counteracting the shift in environmental impacts.

Environmental clauses have no effect

The results of the study also show that environmental clauses in free trade agreements and international environmental conventions have no effect on the relationship between trade liberalisation and the shift of environmental burden.
Dennis Kolcava, a PhD student at ETH Zurich and lead author of the published article attributes this to various factors, among them the mutually non-binding nature of environmental clauses in free trade agreements owing to their lack of diplomatic weight. Furthermore, very few international environmental agreements contain watertight enforcement mechanisms.

Welfare-enhancing and environmentally friendly trade agreements

To mitigate the shift in consumptionand production-related environmental burden, efforts are increasingly being made in the context of bilateral or regional trade agreements to incorporate trade and environmental policy more effectively. However, the results indicate that free trade agreements in themselves almost never lead to wealthier countries exploiting the natural capital of poorer ones. They do show, though, that different political systems have a substantial influence on the trade-related shift in environmental impacts. The researchers found evidence to show that democratic states provide political incentives to relocate environmental impacts to other countries. Decision-makers must therefore ensure that the free trade agreements they set up are welfare-enhancing, environmentally friendly, and enforced. However, the examples of the Transatlantic Trade and Investment Partnership and the Comprehensive Economic and Trade Agreement between the EU and Canada show that this is anything but straightforward.

Kolcava D., Nguyen Q., Bernauer T. (2019): Does trade liberalization lead to environmental burden shifting in the global economy? (NRP 73); published by: Elsevier, Ecological Economics 163 (2019).