Deglobalisation Series | Will deglobalisation save the environment? by Sylvanus Kwaku Afesorgbor and Binyam Afewerk Demena

Anti-globalists and some environmentalists argue that globalisation is harmful to the environment because it leads to an increase in the global demand for and supply of goods and increased energy production. If globalisation is perceived as harmful to the environment, then should we expect that the current deglobalisation trend in the Global North can reverse the harmful impacts that globalisation is seen to have borne on the environment?


 

An important global concern has been to understand the way in which the increasing pace of globalisation affects the environment. Although the literature has been fraught with contrasting results, there are many who strongly believe that increased globalisation has had a deleterious effect on the environment. A large number of environmentalists supporting this view base their argument on the premise that globalisation leads to an increase in the global demand for goods, resulting in increased production that exploits and depletes natural resources and the environment—what is known as the scale effect. On the basis of rising environmental concerns, an important question, then, is whether deglobalisation would produce the opposite effect. Put differently, if globalisation is harmful to the environment, then should we expect deglobalisation to inflict less harm?

Currently, this is an important question to ask considering the heightened anti-globalisation sentiments that have engulfed the Global North. In the recent past, we have not only witnessed Brexit, the election of Trump, and the Belgian opposition of the trade agreement between the EU and Canada, but, more recently, we have seen anti-globalisation sentiments reaching a climax even and especially in the United States (USA) that once was the strongest architect and proponent of globalisation. This has culminated in increased uncertainty and an a near-stalemate for NAFTA, with the US pulling out of Trans Pacific Partnership (TPP) trade agreement, proposing the erection of a wall the border it shares with Mexico, and hiking steel and aluminium tariffs as part of the ongoing trade war with China.

Untitled2The adverse effect of globalisation on the environment is supported by race-to-the-bottom hypothesis. This school supports the hypothesis that increased gains from globalisation is achieved at the expense of the environment by economies more open to global trade adopting looser environmental standards. Those who support this view of the detrimental impact of globalisation on the environment allude to how increasing globalisation creates global competition, resulting in an increase in economic activities that deplete natural resources. An increase in economic activities as a result of the thriving of economies of scale leads to increased emissions of industrial pollutants and to environmental degradation. The pressure on international firms to remain competitive forces them to adopt cost-saving production techniques that can be environmentally harmful.

Lower environmental standards

However, deglobalisation may not necessarily translate into the reduced emission of harmful gases such as CO2, SO2, NO2, but could actually produce the opposite effect. Through the technique effect, we know that globalisation can trigger environmentally friendly technological innovations that could be transferred from countries with strict environmental regulations to pollution havens. With globalisation not only entailing the movement of final goods, but also the transfer of intermediate, capital goods and technologies, multinational corporations with clean state-of-the-art technologies could transfer their green technologies to countries with low environmental standards. It is widely recognised that multinational firms use cleaner types of energy than local firms and thus attain more energy-efficient production processes. Thus, deglobalisation could mean a minimal transfer of these environmental-friendly technologies.

Domestic production means greater pollution

Moreover, the rise of anti-globalisation forces would mean less specialisation in sectors of countries with a comparative advantage. The gains-from-trade hypothesis states that this can result in the loss of the associated gains from trade and specialisation, resulting in the inefficient allocation of resources that would lead to the dissipation of scarce economic and natural resources. If every country has to produce goods to meet its domestic demand, this could result in duplication in the production process, with an associated increase in local emissions. Since some countries have weaker environmental standards, this could possibly worsen overall global emissions. For example, the imposition of economic sanctions on Iran (making Iran less integrated into the world economy) has triggered domestic production (of oil) that has resulted in immense damage to the environment. As a result of import bans, Iran started refining its own crude oil that contains ten times the level of pollutants of the oil it formerly imported.

The rise of ‘eco’ products

The notion of globalisation also has been used to create public awareness regarding labour and environmental standards through international campaigns culminating in the Fairtrade and Eco labellings, for example. The success of these public awareness programmes is based on the different preferences of consumers. Producers are able to increase their market access by producing eco-friendly products. Without international trade, consumers would have been presented with limited choices, and may have been forced to only purchase the domestic goods that may have been produced under loose environmental standards. Thus, globalisation can expand the choice of consumers, enabling them to select environmentally friendly products.

Indirect conservation mechanisms

Globalisation achieved through multilateral negotiations on the platform WTO has also demonstrated that although environment protection is not the WTO’s core mandate, it has indirectly stimulated enthusiasm within its member countries for sustainable development and environmentally friendly trade policies. The green provisions of the WTO provide general exceptions that allow countries to protect human, animal or plant life and conserve their exhaustible natural resources.

Apart from the WTO, regional trade agreements (RTAs) are another appendage of globalisation that promote environmentally sustainable policies. As countries seek to join RTAs, they are made to simultaneously embrace environmental co-operation agreements. Many countries (such as Canada and member states of the EU) have developed national policies whereby conducting environmental impact assessments before signing trade agreements is mandatory. Thus, trade agreements can only be signed when they are compatible with the environmental standards of individual EU member states. This thus compels partners to trade agreements to adhere to environmental provisions contained in the agreements.

Leaders and followers

We have seen over the years how countries such as China that used to be pollution havens have had tremendous gains in reducing their emissions, especially after becoming more integrated into the world economy. Because of globalisation and the incentives to increase its global market access for its products, China has moved away from its image as a top polluting country in the world to a global leader spearheading the fight against pollution. In 2017, China closed down tens of thousands of factories that were not complying with its environmental standards.

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Beijing workers’ stadium on smoggy and clear days from https://www.huffingtonpost.ca/entry/china-air-pollution-2014_us_568e592ce4b0a2b6fb6ecb73

In contrast, we have seen a country like the US that has been at the forefront of fighting against environmental damage slowly drifting away from this fight because of its embracing the anti-globalisation sentiments of the current president Donald Trump. Through its America First Energy Plan, the Trump administration has outlined its preference for polluting industries, the use of fossil fuels, and revival of the coal industry. This points to the fact that countries seeking self-sufficiency or expressing anti-globalisation sentiments may drift away from sustainable development practices towards industrial policies that may be injurious to the environment.

Restricting international trade may have a negative impact on the environment. Deglobalisation would isolate countries, making them less accountable toward other countries for protecting the environment. The gains associated with globalisation could be used as an effective bargaining strategy or as an incentive to demand environmental accountability from countries that want to benefit from global trading systems.


About the authors:

csm_SKA_Picture_Academic_4c02c69704Sylvanus Kwaku Afesorgbor is Assistant Professor at the Department of Food, Agricultural and Resource Economics (FARE), University of Guelph, Ontario, Canada. His research and teaching experiences are in the areas of International Political Economy, Globalisation and Development, Impact Evaluation, Applied Econometrics, and Food and Development.

downloadBinyam Afewerk Demena is a Teaching and Research Fellow at the ISS. His research interests are in the broad area of applied empirical research with a particular focus on applied micro-econometrics in development, international and fishery economics. In his PhD, he examined the impact of transmission channels of intra-industry productivity using applied micro-econometrics, meta-analysis, multi-country micro-panel data, and applied field research via on-site visits.

 

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