ENVIRONMENTAL SUSTAINABILITY AND TRADE COMPATIBILITY

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(STUDENT NUMBER )

TO PROFESSOR

22F Communication Essentials - 428 COMM1016-22F-10652

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Environmental sustainability and trade compatibility

Environmental sustainability and trade are often considered to be parallel to each other. There

are concerns about how trade and the environment interact as a result of the rise of global

trade and the growing integration of global value chains. What are the environmental

implications of trade? How, in turn, may a changing natural environment (such as the effects

of climate change) alter trade patterns? Is trade liberalization beneficial or detrimental to the

environment? What are the immediate and long-term effects, and can the right balance of

trade and environmental regulations maximize environmental gains while minimizing trade

costs?

Trade can have an impact on the environment that is both favourable and

unfavourable.

More market access during trade can encourage exporters to create new goods, services, and

technologies to slow down climate change. Second, the rise in revenue brought on by trade

may motivate society to call for improved environmental quality or reduced greenhouse gas

emissions. Yet, increased trade generally results in a larger global scale of production, which

means that the overall amount of pollution and environmental harm is likely to rise.

Moreover, trade necessitates the use of energy for transportation, which has an adverse effect

on the environment due to air pollution. Economic growth brought on by increased commerce

may have a negative effect on the environment by causing pollution to rise or the degradation

of natural resources. Additionally, the so-called "pollution haven theory" suggests that

economic liberalisation may foster specialisation in pollution-intensive businesses in those

nations where environmental policy rigour varies.

Increased commerce can, though, lead to a better ability to manage the environment by

promoting economic development, social welfare, and growth. More crucially, free markets

can increase access to new technologies that increase the effectiveness of local production

processes by reducing the need for inputs like energy, water, and other detrimental

environmental factors. Similarly, to this, trade and investment liberalisation might encourage

businesses to adopt stricter environmental norms. The environmental demands placed by the

top importers on a nation's export industry increase as that nation becomes more integrated

into the global economy. The supply chain is then affected by the adjustments necessary to

meet these standards, which encourages the employment of more environmentally friendly

production techniques and technology.

Concerns regarding trade's contribution to greenhouse gas emissions stem from its

dependence on transportation services. International commerce entails countries specialising

in exporting goods where they have a comparative advantage while importing additional

goods from their trading partners. Goods must be carried from the country of production to

the country of consumption as part of this global exchange process. Expanding global trade

will therefore probably result in more people using transportation services.

Concerns have been raised concerning how commerce is related to transportation services

and greenhouse gas emissions. International commerce entails countries specialising in and

exporting goods in which they have a comparative advantage as well as importing additional

goods from their trading partners. Transporting goods from the place of production to the

country of consumption is a requirement of this international trade process. So, an increase in

the demand for transportation services is likely to follow a growth in global trade.
Trade may be disrupted as a result of climate change effects.

Rising sea levels and more frequent extreme weather events could have an immediate impact

on trade. Infrastructure for supply, transportation, and distribution chain disruptions is

projected to increase as a result of climate change. Negative effects on maritime transport,

which accounts for over 80% of global trade in terms of volume, could result, for example,

from more frequent port closures because of extreme occurrences. More significantly, climate

change is anticipated to reduce the productivity of all production factors (including labour,

capital, and land), which would eventually cause output losses and a decline in the amount of

international commerce.

How many trade and environmental policies be combined in the best possible way by

policymakers?

At the municipal, regional, national, and international levels, effective environmental policies

and institutional frameworks are required. Whether a country has effective environmental

rules in place will determine how trade liberalisation affects that country's welfare (e.g.

correctly pricing exhaustible environmental resources). As they foster markets for

environmental goods that may then be exported to nations that adopt similar environmental

standards, strict environmental regulations are compatible with an open trading system. This

is known as the first-mover advantage. This is particularly true for sophisticated technologies

like renewable energy sources.

Environmental legislation in industrialised and developing nations has become more uniform

as a result of the inclusion of environmental measures in bilateral and regional trade

agreements. Resources and institutions for capacity building can be provided by more

developed economies, and they can also nudge their less developed allies to tighten

environmental legislation. The OECD has addressed a wide range of trade and environmental
issues, including the relationship between the environment and regional trade agreements

(RTAs), the factors driving the inclusion of environmental provisions in RTAs, and the

importance of strict environmental regulations in promoting trade in environmental goods

and services. In order to track progress towards greater policy coherence and to highlight

policy objectives at the nexus of trade and environment, we are also now establishing a

collection of policy indicators on trade and environment.

 REFERENCES

WTO | Trade and environmental sustainability. (n.d.).

https://www.wto.org/english/tratop_e/tessd_e/tessd_e.htm

De Paula, N. (n.d.). Trade and the Environment: The Search for Sustainable Solutions.

International Institute for Sustainable Development.

https://www.iisd.org/articles/trade-and-environment

International Trade and the Environment in Geneva. (n.d.).

https://www.genevaenvironmentnetwork.org/resources/updates/international-trade-

and-environment-geneva/

Sajeev, A., & Kaur, S. (2020). Environmental sustainability, trade and economic growth in

India: implications for public policy. International Trade, Politics and Development,

4(2), 141–160. https://doi.org/10.1108/itpd-09-2020-0079

Saha, R. (2020, May 6). International trade and environment sustainability: The two must

tango. ORF. https://www.orfonline.org/expert-speak/international-trade-and-

environment-sustainability-the-two-must-tango-65735/