by Paulina Glimsholt

International trade became a reality because of a mixture of factors, including the liberalization of trade barriers, the rise of new consumer markets, the technological developments in telecommunications, and the improvement of transportation methods which resulted in lower transportation costs.

On a global scale, the increase in international trade has brought significant advantages, like the economic growth of previously isolated countries or entire geographic regions, increased competitiveness of businesses adopting international and efficient supply chains that reduce their costs and that (ideally) translate into lower prices to the final consumers, and increased product variety available at our local markets.

Negative Impact on the Global Environment

Despite all of the advantages associated with international trade, its negative impact on the global environment is admitted by both environmentalists and free-trade advocates. The effect of international trade on the environment has mainly been addressed in the contexts of domestic consumption of imported goods, foreign effects caused by outsourced production, and the environmental impact caused by the transport of goods in international trade.

At a domestic level, the number of products offered and the variety of them have increased exponentially. Also, the companies’ investment in marketing campaigns and the important role played by the internet and social media spreading the word on what is ‘out there’ in the market has grown in relation to the increasing number of products.

On the positive side of things, a shift in consumer preferences for more environmentally-friendly products has been observed in the last years. People’s awareness of environmental issues is on the increase, influencing the way they shop, and guiding their choices for ‘green products’ instead of the ‘evil-polluting ones’. However, this first assumption is mainly observed in those countries which have already attained a high standard of living.

Developed Countries Turn Their Eyes Away

Developed countries that have managed to satisfy their populations’ most basic demands, then turn their eyes toward the creation of new institutions to protect the environment, the enactment of green legislation, the development of environmental technology, etc. As positive as this may sound, the truth is that the disparity in environmental policy from one country to another, especially between consumer and production markets results in a reduction in environmental impact in the consumer countries but can still result in damage to the environment of the developing countries where the products are sourced.

Moreover, a major concern is expressed about the scale of current consumption, and whether it is sustainable in the future. As consumption patterns increase, so does production output and consequently the number of natural resources used in the manufacturing process.

In a foreign context, free-trade supporters propose that international trade has increased economic growth in developing countries which is also good for the environment. According to some empirical evidence, as per capita income goes up, there is a certain point at which the negative impact on the environment stops and turns into an improvement of environmental quality.

However, environmentalists claim that such behavior only applies to short-term environmental problems (like water pollution); and not to long-term environmental problems (such as the emission of greenhouse gases), an increase of per capita income improves the environmental quality only for a certain period of time until it eventually turns again into a cause of its deterioration.

Free-trade advocates also argue that economic growth allows for more financial resources to be reinvested in the environmental improvement; nevertheless, a reactive rather than preventive approach entails the risk that economic development could cause irreversible damage to the environment, such as the loss of species, or that the cost of ‘fixing the problem’ could exceed the original cost of preventing it in the first place.

Focus on Resources Needed

Contemporary theorists propose that the Ricardian model used to explain international trade should not only focus in the capabilities of a labor market to produce goods efficiently or inefficiently, but should also take into account those resources of which a country is abundant. In this context, there is nothing wrong with international trade promoting the geographic specialization of certain products.

Countries that have abundant resources and adequate environmental conditions for the production of a certain product should definitely specialize in doing it more efficiently and increase their exports. However, for sustainable development to be achieved, it is important that the environmental impact involved in the manufacture and distribution of such product is adequately valued and internalized by the companies that profit from their use and exploitation.

This means that policy makers should ensure that companies pay for any of their activities that might cause environmental damage through different measures such as green taxes, pollution charges, etc. Also, policy makers should consider regulating the companies’ obligation to provide their customers with sufficient and clear information about their products’ places of origin and assembly, in order to help them make informed purchase decisions.