Sustainable Development International Trade and International Agreements

1
Sustainable DevelopmentInternational Trade and
International Agreements

• Chapter 20

2
Understanding Sustainable Development
3
Sustainable Development as a Global Objective

• Sustainable development refers to managing
  earths resources to assure long-term quality and
  abundance for future generations
• Aims to achieve economic prosperity and
  environmental quality
• Also referred to as intergenerational equity
• Involves fundamental change in how society makes
  market decisions both consumption and
  production
• In practice, there are criticisms and concerns
• e.g., Nobel Laureate Robert Solow argues against
  using sustainable development as a policy
  objective because it is a vague concept instead
  consider sustainability as an obligation to
  future generations

4
Growth and the Environment

• Sustainable development relies on the premise
  that economic growth and environmental quality
  must not be competing goals. Why is this
  important?
• Data show that the environmental impact per unit
  of income associated with growth must decline
  between 3.5 and 4 percent per year to avoid
  further pollution and natural resource depletion
• Problem is more serious for developing countries
  that have high growth rates and rapidly rising
  populations, such as China and India

5
Growth and the EnvironmentEnvironmental Kuznets
Curve (EKC)

• Research has examined whether a technical
  relationship exists between economic growth and
  pollution
• A model of this relationship is the environmental
  Kuznets curve (EKC), an inverted U shape,
  implying that
• Early stages of industrialization are linked to
  relatively high pollution levels when growth is a
  priority and environmental controls are lenient
  or nonexistent
• More advanced economic development is linked to a
  shift in the opposite direction with greater
  concern for environmental quality and a
  strengthening of environmental regulation
• A consensus is forming that this tradeoff is not
  as severe as once believed

6
Environmental Kuznets Curve
7
Framework for Sustainable Development

• United Nations Conference on Environment and
  Development (UNCED) commonly known as the Rio
  Summit was a forum held in 1992 to discuss
  issues relating to sustainable development
• Included in the summits key documents were
• Agenda 21 a voluntary action plan outlining the
  course for worldwide progress toward sustainable
  development
• Rio Declaration a list of 27 principles to act
  as guidelines for achieving global environmental
  quality and economic development

8
Framework for Sustainable Development (continued)

• World Summit on Sustainable Development (WSSD)
  was held in Johannesburg in 2002 to renew
  interest in sustainable development and assess
  progress since the Rio Summit
• Among the summits accomplishments
• Adopted a plan to fully implement Agenda 21
• Strengthened the notion of sustainable
  development
• Established over 300 partnership initiatives to
  complement government actions aimed at
  sustainable development

9
Controlling Transboundary Pollution
10
International Agreements to Control Transboundary
Pollution

• Montreal Protocol and Amendments
• Aimed at phasing out ozone-depleting substances
• Established and made permanent a Multilateral
  Fund to help developing nations in this effort
• U.N. Framework Convention on Climate Change
  (UNFCCC)
• Garnered a commitment by each signatory nation to
  launch a strategy limiting releases of greenhouse
  gases (GHGs)
• Kyoto Protocol to the UNFCCC
• Calls for 38 developed nations to reduce GHG
  emissions to 5.2 below 1990 levels by 2012 with
  no targets on developing countries
• Provides for the use of market-based instruments,
  called flexible mechanisms to achieve emissions
  targets, including a trading system of GHG
  allowances

11
International Agreements to Control Transboundary
Pollution (continued)

• London Dumping Convention (LDC)
• Prohibits ocean dumping of certain wastes,
  including radioactive wastes
• US-Canada Air Quality Agreement
• Calls for each country to set emissions caps on
  sulfur dioxide (SO2) and nitrogen oxides (NOx)

12
International Trade and Environmental Protection
13
Free Trade Versus Protectionism

• Proponents of free trade argue that nations
  should trade with one another because there are
  tangible gains, such as
• Higher worldwide output
• Efficiency gains from specialization
• More competition and lower prices in global
  markets
• Protectionism supports using trade barriers to
  protect the domestic economy from foreign
  competition, because they believe trade can have
  negative consequences such as
• Unfair competition
• Job losses
• Threats to environmental quality

14
Concerns about International Trade and
Environmental Quality

• Production costs are lower in nations with more
  lenient environmental standards, giving their
  producers a competitive advantage, sometimes
  called the pollution haven effect
• Quality of imports produced in nations with lax
  regulations on toxic chemical use, fuel
  efficiency, coal consumption, etc. may lead to
  international externalities

15
Counter Arguments

• Economic gains from trade will help poorer
  nations afford the costly cleanup of
  environmental pollution
• An improved economy can provide means to
  implement better environmental policy, as implied
  by environmental Kuznets curve
• This argument is consistent with sustainable
  development
• Both sets of arguments were part of negotiations
  for major international trade agreements

16
International Trade Agreements and Environmental
Goals
17
North American Free Trade Agreement (NAFTA)

• NAFTA was reached by the U.S., Mexico, and Canada
  in 1992
• Provisions dealing with the environment include
• Commitment to sustainable development
• Agreement to implement NAFTA with the aim of
  environmental protection and not to lower
  standards to attract investment
• Consensus to aim for congruence of each country's
  environmental regulations
• Agreement that NAFTA dispute settlement panels
  will solicit environmental experts as needed

18
NAFTA (continued)

• The three nations formed the North American
  Commission for Environmental Cooperation (CEC) to
  address environmental impact of increased trade
• In 1992, the U.S. and Mexico initiated an
  Integrated Border Environmental Plan (IBEP)
• Aimed at improving water quality, monitoring air
  pollution, tracking hazardous waste, and
  promoting pollution prevention for the border
  region
• Border 2012 Program extends efforts of the IBEP
  and the Border XXI Program aims to protect
  health and environment in the border region
  following sustainable development

19
General Agreement on Tariffs and Trade (GATT)

• Executed in 1947, GATT was a major international
  treaty aimed at reducing trade barriers
• Environmentalists were concerned about how GATT
  rulings might run counter to environmental goals
• e.g., under GATT, an import cannot be restricted
  solely on the basis of an exporter using a
  pollution-generating input or production method
• After negotiations called the Uruguay Round,
  countries had to use least trade restrictive
  measures to achieve environmental goals, and
  World Trade Organization (WTO) was formed as
  successor to GATT

20
World Trade Organization (WTO)

• An international association aimed at
  facilitating trade and overseeing trade policy
• It established a Committee on Trade and
  Environment (CTE), whose directive is
• To identify the relationship between trade
  measures and environmental measures to foster
  sustainable development
• To recommend any necessary changes to the
  multilateral trading system