Harmfulness of Free Trade for the Environment

One of the most controversial issues regarding globalization in the 21st century is the concern that free trade damages the environment both locally and internationally. The effects of worldwide trade and economic development on the environment have been widely discussed in recent years, due the increasing amount of free trade agreements (FTAs) being created around the world. A 2014 report from the World Trade Organization (WTO) shows that there has been a huge increase in the amount of regional trade agreement notifications being received by the General Agreement on Tariffs and Trade at the WTO, revealing the trend in more FTAs being formed. Trade agreements between two or more countries have intensive and extensive ramifications for all participating parties. Free trade is important in reducing barriers to trade and establishing a more stable trade environment, thus encouraging more multilateral trade. Advocates of free trade argue that it is efficient and the most effective method of trade because it allows individual countries to specialize in producing the goods in which they have a comparative advantage. However, there are a variety of environmental problems that arise from the practice of free trade. These problems can be broken down into the concept of the scale effect, increased greenhouse gas emissions and how developing countries are becoming havens for waste.

FTAs are deals between two or more participating countries to eliminate the barriers to import and export goods and services between them. Under an FTA, goods and services can be easily bought and sold across international borders with little regulations, tariffs, or quotas. In general, economists agree that free trade deals lead to sweeping economic growth, but with increased economic growth there is the risk that there will be an increase in industries that hurt the environment by releasing greenhouse gases and hurting the environment. When evaluating the impact of free trade on the environment, economists can conceptualize its implications using a concept called the scale effect. The scale effect refers to how increases in economic growth, which arise from free trade, have an impact on the environment. Trade liberalization, a result of free trade, charges an increase in economic activities and expands economic growth, which then triggers the use of more and more inputs to sustain the higher level of economic activity. This shifts out the demand curve for pollution, and the scale effect of economic growth increases the amount of pollution produced. According to Greenpeace, “In practice, free trade deals are about opening up borders so big companies can profit from larger markets… corporations that produce and sell fossil fuels are included in that list”. This suggests that FTAs widen the worldwide market for fossil fuels, which then encourages gas, coal, and oil corporations to increase their activities, extract, and burn more of these natural resources, especially natural gas, which negatively effects the environment.

Producers of natural gas are incentivized to engage in free trade. In general, the U.S. Department of Energy is in charge of giving the green light for any gas exports. However, in 1992 a clause was added to the Natural Gas Act that states that the Department of Energy is required to approve any exports that involve countries the U.S. has free trade agreements with. This means that natural gas companies are given a reason to use FTAs to engage in various forms of extraction, including fracking, which is severely detrimental to the environment. This clause in the Natural Gas Act incentivizes natural gas companies to extract more fuel and engage in free trade. This trend can be seen in the effects of the North American Free Trade Agreement (NAFTA). NAFTA is one of the most famous free trade agreements in the world and it involves the U.S., Mexico, and Canada. NAFTA allows for easier facilitation of trade between the three countries as it gets rid of many trade barriers. From the perspective of oil and gas companies, NAFTA has been crucial in their growth. The flow of oil and gas between the countries has increased dramatically. Natural gas exports from the U.S. to Mexico have risen to 4.4 billion cubic feet per day, which is more than double the levels seen in 2014. This rise in demand has led to new pipelines being developed; a pipeline from South Texas to Mexico was recently created and bolsters shipments as it allows gas to be moved further into Mexico. The trade of oil between the U.S. and Canada has also increased in recent years. The U.S. is importing approximately over 3.3 million barrels of oil per day from Canada. The trade of natural gas and oil is extremely destructive to the environment. From the moment it is extracted, to being transported, and then burned it is degrading the environment. The land disturbance and infrastructure required for natural gas and oil drilling can hurt local ecosystems by causing erosion, disturbing wildlife, and contaminating nearby water sources. The construction needed to build these extraction sites often displace wildlife and cause the erosion of dirt and pollutants into waterways. The transport of the fuel also requires the environmental destruction, and when the fuel is finally burned it contributes to air pollution and increased greenhouse gas emissions. Free trade has allowed for the natural gas and oil to increase in extraction and transport, severely damaging the surrounding environment.

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One method, economists use to look at how free trade impacts the environment, is the pollution haven hypothesis. The hypothesis states that differences in the stringency of environmental regulations between developed and developing countries will provide developing countries with a comparative advantage in industries with pollution intensive production. And while this hypothesis would be an excellent reason for why free trade is bad for the environment, there currently isn’t a lot of empirical evidence to support it. However, there is direct and concrete evidence that developed countries are taking advantage of the free trade system and exporting their waste to the developing world where they are creating havens for pollution. Countries with lower wages and more lax environmental regulations have a comparative cost advantage over developed countries where waste management is an expensive service and environmental regulations are usually stricter. This means that waste management companies in the West tend to ship their scrap plastic or, at times, household waste to ‘waste havens’. Currently, there is a huge trade imbalance between the developed world and the ‘Global South’, which includes countries like China, India, Cambodia, and other parts of the developing world. This is a consequence of free trade on a global scale. Free trade allows for massive shipping containers from the Global South to arrive in the developed world, like the U.S., full of consumer products, and we have nothing to send back in them, except occasionally agricultural goods. Those same shipping containers would often head back to the Global South completely empty, which is bad business for the shipping companies because they have to eat their costs. So, what those companies do is sell their cargo space to waste exporters at a steep discount because some money for trash is better than no money for nothing. That trash export would absolutely not exist without free trade.

This trade imbalance can best be described by the example of plastic waste exportation to the Global South, specifically, China. Global trade in plastic waste is a big business. From 1988 to 2016, 168 million tons of plastic waste was exported, with most of it going to China and India. The unfortunate reality is that most of the plastic is contaminated and can’t be recycled. It’s usually dumped because the Global South lacks proper waste management facilities. People in the West like to believe that their waste is being recycled, but in reality, it is often being dumped in landfills or incinerated, which has caused a breadth of environmental consequences for these developing countries. This is driven by the brutal economics of free trade because exporting our waste is often cheaper than dealing with it locally and we are able to ship our problems elsewhere for a low cost. The human and environmental toll of plastic waste imports on China was exposed in a viral documentary in 2016 called ‘Plastic China’, which detailed the heart-wrenching story of an 11-year-old girl living in a workshop for imported scrap plastic, which created toxic air and polluted waterways in China’s countryside. Plastic that cannot be reused is often burned and this releases carbon monoxide, dioxins and furans, all of which are toxic. The villages and households in the vicinity of these plastic waste facilities are heavily affected by pollution. In 2017, fed up with being a dumping ground, China notified the World Trade Organization that it intended to ban the imports of plastic waste. The ban came into force in March 2018, setting off a chain reaction in the global plastic waste system. Numerous countries in the West have been unable to cope since, resulting in dramatic price increases for exporting, and more plastic being incinerated or sent to the landfill. If export rates continue as they are, the new Chinese policy will displace an estimated 111 million metric tons of plastic waste by 2030. So now, all of this waste is flooding into South East Asia, countries like Indonesia, Malaysia, Vietnam, India, Taiwan and Thailand, resulting in polluted waterways, fires, and illegal dumping. China’s 2018 ban of plastic waste importation demonstrates a clear example of a regulatory loophole that had been exploited for years. When plastic waste is exported to developing countries for treatment, these countries carry an additional burden besides having to deal with their own materials. When this burden becomes too great, untreated waste is simply dumped into the environment, turning recipient countries into havens for pollution as well as being destinations for unwanted waste. Free trade by its nature encourages the exploitations of these loopholes across borders, with the greatest harm done to developing countries.

The goal of free trade as a whole is to encourage greater economic activity, which increases the scale of global production. Economic growth means increased waste, increased greenhouse gas emission and improper waste disposal sites. Overall, free trade hurts the environment by stimulating more economic activity, increasing emissions and allowing developing countries to turn into havens for waste.