Costs of the trade-environment relationship: capital crisis and genesis of a global antinomy

Costs of the trade-environment relationship: capital crisis and genesis of a global antinomy

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By Walter Chamochumbi

Critics of the trade-environment relationship are based on the argument that a phenomenon called the “displacement effect” occurs, which is especially detrimental to poor countries in the south, where there are mostly weak environmental regulations, because industries are moving towards them. highly polluting of the developed countries of the north where there are strong environmental regulations. A global phenomenon occurs whereby southern countries are used as environmental garbage dumps for toxic waste and polluting technologies from northern countries.

With the recent US financial crisis, the contradictions inherent in the free market thesis and the supposed invisible hand that regulates it have become evident once again on a global scale. Also when it is said that trade has a positive effect on the environment, despite being a controversial thesis. And it is that in fact the positions differ if it is the political reach of the industrialized countries and of the large transnational corporations and multilateral organizations, or of the developing countries and the dynamics that social movements and organizations of society follow. civil society, who have been denouncing and actively mobilizing against its main causes and systemic effects: the greater emission of greenhouse gases and the phenomenon of climate change, as an expression of a capital crisis and the genesis of a global antinomy if things are not changed .

Trade-environment relationship and Kuznets environmental curve (1)

There are different arguments for discussing the study of the trade-environment relationship, that is why we take as a reference the hypothesis of the Kuznets Environmental Curve (CAK, CKA or EKC in English), because despite the greater consensus of research on the inconsistencies of its validity, its central argument continues to influence the framework of international negotiations, especially those
of free trade, based on the following argument: “1) free trade accelerates economic growth, 2) economic growth leads to a growth in domestic demands for environmental improvements; ergo, 3) free trade leads to a process of improvement of the environment through the unleashing of positive internal factors. " (2)

The CAK hypothesis assumes that trade is an end in itself from which the economic growth of the countries is stimulated and after the environmental improvements to be achieved. It proposes an explanatory framework of the mechanisms of global trade negotiation and of the economic growth of the countries versus their environmental implications, taking as a reference the measurement of the emission of
some polluting gases into the atmosphere.

Caparrós (1996) (3) refers that the previous studies by Grossman and Kruegger (1991) (4) and the World Bank (1992) (5) were carried out to solve this dilemma of how free trade and the consequent increase in economic growth of a country are positive from their impact on the environment. Thus, they obtain a first response with the approach of the GATT (current WTO) and the World Bank, considered an approach of an empirical nature and which would later be known as the CAK hypothesis. In general, the CAK maintains that environmental pollution increases with economic growth up to a certain level of income (limit) and then decreases: developed countries that present greater environmental problems due to their high level of industrialization, to the extent that their income levels increase to higher rates, your environmental problems will decrease in the long run. A similar behavior assumes the CAK should follow the developing countries: if they accelerate their process of industrialization and economic growth, with the increase of their exports and their insertion in the global market.

The CAK hypothesis was enunciated -in 1993- by Panayotou (6), based on studies related to the effects of economic growth on environmental indicators such as air and land. Panayotou drew on previous studies by Grossman and Kruegger, the World Bank and others, who extrapolated the relationship
equity / entry into the environmental field based on the theory formulated -in 1950- by Simón Kuznets (Nobel Prize winner for economics), based on his study of the evolution of the income distribution of countries through their development processes.

Kuznets was based on the equity / income relationship, posing it in the shape of an inverted “U”, according to which he measured as the progress of a country accelerates (due to the increase in per capita income) the level of equity deteriorates (increases inequality in income distribution) up to a cutoff point and then this level of equity improves as income increases. Panayotou carried out subsequent studies on the effect of growth on other environmental indicators, based on the empirical finding of an inverted "U" relationship between economic income and emissions or concentrations of some gases
pollutants (SO2, NO2, Smog, etc.).

Several researchers coincide in pointing out that the CAK hypothesis is not valid, because it is only true in the case of sulfur dioxide (SO2) and dissolved oxygen in rivers, but not in the case of carbon dioxide (CO2). one of the most important GHG, or in the emission of urban waste, whose levels, on the contrary, skyrocket with the increase in income level. Saravia (2002) (7), in
His research for Latin America and the Caribbean concludes that CAK is not a valid argument in the emission of gases such as CO2 and SO2, and that inequality in income distribution affects the link between the level of per capita income and environmental quality. , being the main negative environmental factor. This shows that the GDP is an insufficient indicator to study environmental problems, when the greatest problem in the countries of the region is the unequal distribution of income and the lack of comprehensive policies in economic, social and environmental matters.

Critics of the trade-environment relationship are based on the argument that a phenomenon called the “displacement effect” occurs, which is especially detrimental to poor countries in the south, where there are mostly weak environmental regulations, because industries are moving towards them. highly polluting countries in developed northern countries where there are strong
environmental regulations (Gitli and Hernández, 2002) (8). This trend is known as the “Pollution Shelter Hypothesis”; that is, when a global phenomenon occurs whereby southern countries are used as environmental garbage dumps for toxic waste and polluting technologies from northern countries.

In this regard, although in general we assume that greater technological development and commercial exchange between countries should promote north-south transfer processes, and to that extent shorten stages in the technological progress of the least developed countries: in view of the fact that the negotiation dynamics trade mobilize capital investment and financial resources and demand greater capacities and competencies in the management of processes and quality products to respond to the
global commercial insertion needs. However, it is also true that there are determining factors, because there is not always a linear and ascending behavior in the technological progress of the countries.

In fact, we know that not only can more sophisticated technologies be transferred from the north to the south, but that environmental risks inherent to them can also be transferred (as already explained, it happens with the "displacement effect" and the "hypothesis of pollution havens ”). On the other hand, we must also consider the context of application of the technologies to be transferred: their degree of effectiveness-efficiency and adaptability to southern countries (with different ecogeographic and cultural conditions). The so-called technological progress for the poor countries of the South may be subject to a series of variables and risks if regulation policies, strategic plans for insertion and control of international and national environmental standards are not oriented for the technologies to be introduced in the different sectors. productive. Otherwise, the technology transfer process can be complex, relative and even inconvenient at an economic, social and environmental level for the recipient countries.

An example occurs with the world trade in agrochemicals (which are part of the technological package of the “green revolution”) and that since the 1950s have been promoted by the countries of the North to modernize the agriculture of the poor countries of the South. Nowadays, agrochemicals are marketed worldwide by transnational companies with enormous profitability. However, numerous studies confirm that several of these products are extremely dangerous (the best known of the "Dirty Dozen") and even so they have been promoted and commercialized indiscriminately in southern countries, under the assumption of modernization and technology transfer, when these products were banned in their countries of origin. Another recent example is the great controversy
generated on the so-called Genetically Modified Organisms (GMOs) or also known as transgenic crops, which have also been commercially promoted on a global scale by the same agrochemical transnationals, even though there are also strong questions about the consumption of these products due to their serious environmental risks and sanitary.

Does the income level have a positive effect on the environment?

We analyze the so-called "limit income" on which the CAK hypothesis is based, because it is the variable that reverses the pernicious trend of economic growth on the environment: income maximizes the pollution function up to a certain threshold (called "limit income" or inflection point) from which contamination rates begin to decrease. In this regard, we cite two key questions formulated by Gitli and Hernández (2002) about the validity of the CAK: “First, the majority of the world's population still lives in the growing part of the CAK, so environmental degradation it will continue for quite some time if we wait until the entry mechanism operates to take more systematic and coordinated action globally. Second, from the CAK analysis it is not possible to deduce what will happen to those environmental damages that once done are impossible to repair (irreversible damages) such as the loss of biodiversity. Therefore the price we have to pay in ecological terms for waiting for income growth to solve our environmental problems may be too high. " (9)

Regarding the first question “that the majority in the world still live in the growing part of the CAK”, one can speculate on the real situation of the industrialized countries: in what would be their limit income levels reached with respect to the point decrease in the pollution curve. Even assuming that some countries were on a descending level (which is highly unlikely), the levels of pollution reached by other industrialized countries in the same hemisphere may be different (higher or lower). However, if we only focus on reducing the emission of CO2, one of the most important GHGs in the problem of warming and climate change, it will be very difficult (if not unlikely) to predict how long it would take (perhaps hundreds of years) until the
pollution curve for this gas could begin to decline progressively.

In this regard, for example, it is known that the United States is one of the few countries in the world (of more or less 141 committed countries) that until today systematically refuses to sign the Kyoto Protocol for the reduction in the emission of GHG, being one of the main responsible for producing them (about 30% of GHG emissions worldwide). One explanation for this is that, by the way, the economic interests of large industrial capital prevail over environmental criteria, making it difficult to have a more optimistic view on the matter.

It is evident that the industrialized countries of the north have the greatest responsibility in the global emission of GHG, despite the environmental regulations they have. Even so, they present differences in the control of their pollutant emission levels versus their income levels. Furthermore, a strong argument is that the CAK ultimately does not conform to the behavior of an inverted “U” in reducing CO2 in industrialized countries versus higher economic growth, if not the opposite.

In the case of the southern countries, we can assume that even though their income levels could grow (at a much slower and variable rate) and subject to their level of specialization in the production of goods and the level of insertion they achieve in the international market, as well as their political stability. This sustained growth of income so that it reaches its highest point - limit - until the pollution curve begins to descend, in the process it could take much longer; meanwhile, pollution problems will continue or increase (this without considering that they have strict environmental regulatory frameworks, which is unlikely). All the more so in the case of megadiverse countries such as Venezuela, Colombia, Ecuador, Bolivia, Peru and Brazil, which are much more vulnerable to these problems.

Regarding the second question “irreversible environmental damage”, assuming the validity of the CAK, there could be negative environmental impacts of such magnitude that, as mentioned, they can be irreversible (numerous cases of losses in biodiversity resources are a clear example of this. ). Thus, we have renewable resources whose natural regeneration rate is much slower than its extraction rate, which in practice makes it a non-renewable resource (for example, tropical forests, agricultural soil, ichthyofauna, etc.). With all the more reason if we consider the development of extractive activities: the case of minerals, oil and gas, whose technological processes used to extract these resources (even if environmental impact studies, monitoring protocols, mitigation plans, etc. are applied). ) can negatively impact the carrying capacity of ecosystems and affect their degree of resilience and stability, and even irreversibly affect them. In these cases it happens that the cost of deterioration or loss of the natural resource or ecosystem is too much
high in the trade-growth-environment relationship (even when it is a highly profitable activity), because the impact on natural capital could not be compensated (much less replaced), especially if we recognize the urgency of prioritizing global environmental sustainability criteria.

Genesis of the global trade-environment antinomy

We have pointed out that despite the inconsistencies of the CAK hypothesis, in the midst of the current crisis of capitalism and the global environmental crisis, its argument seems to persist in the logic of multilateral organizations and the governments of the industrialized countries of the North. , in its economic policies and trade negotiation mechanisms with the countries of the South, and in the implications that undoubtedly arise in the greater emission of GHG and in the phenomenon of climate change, in addition to the problems of greater poverty, social inequity and environmental vulnerability.

When investigating the generating causes in the acceleration of environmental imbalances at the global level, beyond the neoliberal sectors interested in ignoring or minimizing it, more evidence has been found of the direct relationship that exists between warming and climate change and the increase in GHG emissions caused by the economic-commercial development model of the
societies in industrialized and developing countries.

Specialized reports warn that the level of emissions of carbon dioxide (CO2), Methane (CH4), nitrogen oxides (N2O) and other pollutants has increased in recent centuries. The Oxfam International report (2008) (10) on the problem of climate change confirms this, and therefore proposes the need to incorporate a human rights approach, because polluting carbon emissions from the developed countries of the North have increased and they violate the rights of millions of people, especially in the poorest countries. Countries such as the United States, Canada, Western Europe, Australia and Japan, of the 23 richest countries in the world that account for 23% of the world's population, have produced 60% of global carbon emissions since 1850 and today continue to produce the 40% of annual carbon emissions. And despite these countries having committed to reducing their annual emissions to 1990 levels, their emissions in 2005, far from being reduced, have increased by more than 10%. This shows the differentiated responsibility of the countries to the north and south, and their very little political will to reverse this serious problem, as if it were a global antinomy, and less to assume concrete agreements to eliminate the asymmetries and inequities of the global scenario free market.

It is evident that a change is urgently needed in the current development paradigm and in global and regional policies, recognizing trade and economic growth as complementary measures to those of redistribution and social inclusion, and betting on the greater goal of sustainable human development.

Walter Chamochumbi Mag. Ing. Agrónomo, Consultant in Environmental Management and Development

(1) Excerpted from "International trade and environment: scope of the controversy on the hypothesis of the Kuznets Environmental Curve and its implications to the North and South", article by Walter Chamochumbi, 2005, published in Environment and Society (http: //, 10 p.
(2) Quote from Cfr. Zoellick, R., 2002: 12, in Eduardo Gitli and Greivin Hernández (2002) ... “The existence of the Environmental Kuznets Curve (CKA) and its impact on international negotiations”. Working Doc. Series 009-2002, CINPE (International Center for Economic Policy for Sustainable Development), Costa Rica, 30 p.
(3) Alejandro Caparrós G. (1996)… ”Some aspects of the relationship between trade and the environment”, Working Document of the Faculty of Economic and Business Sciences, Prof. Javier Oyarzun. PhD Course 1995-1996, Department of International Economics and Development, Universidad Complutense Madrid, 35 p. 4 Grossman G.M. and Kruegger, A.B (1991), cited by Gitli and Hernández (2002) and Caparrós G., A. (1996).
(5) Saravia L., A. (2002), at p. 3., notes that the interest arises with the publication of the World Bank's World Development Report 1992, entitled "Development and the Environment." However, according to Gitli and Hernández (2002), on p.3., In these first studies of the The World Bank does not yet appear the specific reference of the Environmental Kuznets Curve, until 1993 with Panayotou.
(6) Cited by Gitli, E. and Hernández, G. (2002), Ibid., P.1
(7) Alejandra Saravia L. (2002)… “the Kuznets environmental curve for Latin America and the Caribbean”, Academic Reflection Papers, Universidad Mayor de San Simón / Faculty of Economic Sciences, Co-financing Program for Cooperation in Higher Education (MHO), PROMEC, No. 23, June, Cochabamba, 31 p.
(8) Ibid.
(9) Op cit de Gitli, E. and Hernández, G. (2002), Ibid., P.16.
(10) “Climate Abuses and Human Rights: People at the Center of Climate Change Policy”, Oxfam International Report (2008), 43 p. //

Video: Yanis Varoufakis on BBC Question Time - October 8, 2020. DiEM25 (June 2022).


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