In the 1990s a new dimension was added to the marketplace: environmental concerns now figure prominently in international trade. But they are fuelling trade disputes and influencing who trades what with whom. And developing countries depending on exporting their resources are feeling the effects, as environmentally motivated trade barriers become more common.

Trade and environment are linked in various ways. Differences in environmental legislation at the national and local levels can create an uneven playing field among trading partners. When the actual environmental costs of production (e.g. pollution costs) are not included, the product price may be lower than that of a foreign competitor that has had to integrate such costs into its product pricing. This type of competitive advantage can result in the non-enforcement or even lowering of existing regulations. Conversely, market demand can favour 'greener products' which encourage improved environmental performance.

Protected markets can also cause environmental damage by sheltering polluting domestic industries. Occasionally, they can prevent the import of certain products. For example, the Multi-Fibre Arrangement (MFA) limits the import of textiles and clothing from developing countries to developed countries. Canada's participation in the MFA costs Bangladesh more than Canadian official development assistance bound for that country.

Developing countries need trade to develop sustainably. More open foreign trade would free resources to invest in environmental protection, cleaner and more efficient technology, transmission of higher environmental standards and so on. But they will only be successful if they also increase environmental protection efforts. Consider, for example, the growth in South East Asia during the 1980s and 1990s that was paralleled with a rise in deforestation, acid rain and carbon dioxide emissions.

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Virtual Ideas

Cosbey, Aaron. Trade and sustainable development: The global picture. Presented at "Trade Policy and Environmental Agreements: Developing a South African Response" Johannesburg, August 21-22, 1997. http://iisd.ca/trade/southafrica.htm IISD's Rio+5 special focus report: Trade and sustainable development. Prepared for the Rio+5 Forum, Rio de Janeiro, 13-19 March 1997. IISD's Trade and Sustainable Development Web site

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