Trade, Development and the Environment

M. Scott Taylor, University of Calgary

Abstract

Debates over the merits of trade liberalization have been going on for some time, but over the last ten years the debate has intensified as environmentalists and the trade policy community squared off over the environmental consequences of liberalized trade. This note asks and then answers three basic questions regarding the trade and environment relationship from a developing country perspective. These are: (1) what are the links between trade, the environment and development? (2), why are trade and the environment issues especially important to developing countries? and (3), what role can donor agencies play in assisting developing countries in the area of trade, development and the environment? It argues that while the existing empirical evidence is incomplete there is little evidence that dirty industries migrate to low regulation developing countries, but rather economic development and capital accumulation are the most likely cause of the rising shares of pollution intensive goods in the GDP and exports of many developing countries. Developed countries, which are still the primary producers of pollution intensive goods, are however losing their competitive position in these same heavy industries. A rising environmental awareness in the developed world coupled with the shrinking of heavy industry in these countries is likely to produce an ongoing demand for protection from developing country exports on environmental grounds. Developing countries must integrate into the world economy to foster their development. To ensure continued access to developed country markets, this note suggests that developing countries should measure and record environmental quality, develop environmental assessments for major projects and policies, and develop the capacity needed to maintain and defend their interests in WTO negotiations.