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 thescale 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.
The 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.
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:
Sylvanus 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.
Binyam 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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After benefiting from international trade and investment for the past 30 years, China’s global position is starting to change. This is perhaps most evident when regarding its position at the centre of an ongoing ‘trade war’ with the United States. Given its role as leader in international trade, will China be able to ‘restart’ globalisation and offer an alternative to globalisation and deglobalisation as defined by the West?
As developed countries appear to step back from globalisation, China senses an opportunity to step forward and set new rules for globalisation. A major component of the Chinese strategy to lead changes in how globalisation is thought of and practiced is the One Belt and One Road Initiative (OBOR) of the Chinese government. Aimed at improving infrastructure and connectivity between China and the world, this initiative comprises more than physical connections. The Chinese government argues that this initiative includes not just economic, but also socio-cultural linkages, ultimately leading to mutual benefits for all countries involved. The OBOR defines China’s idea of globalisation in a new era in which emerging economies backed by rising economic power and strong alliances are seeking greater influence on global issues.
China’s push for globalisation has evoked mixed reactions across the world, and Beijing has had to deal with multiple obstructions to its vision. Moreover, logistical and bureaucratic issues are plaguing countries participating in the OBOR. For instance, although China has signed bilateral cooperation agreements with Pakistan, Hungary, Mongolia, Russia, Tajikistan, and Turkey, with a number of projects planned under those agreements, the proposed projects have not been implemented. Most such projects are infrastructure-related, for example a proposed train connection between eastern China and Iran, which eventually may be expanded to Europe. Powerful Western economies and neighbouring Asian giants have remained cautious in their assessments and acceptance of the initiative.
Sustaining the benefits of globalisation
An important motivation behind the OBOR is the endeavour to continue to benefit from globalisation. Since 1979, China has implemented an Opening and Reforming Strategy. However, its export in percentage of GDP (trade openness) in 1980 was only 5.9% and outward Foreign Direct Investment (FDI) was 1.7 billion US dollars. Only after the 1990s China’s globalisation process really began. Joining the WTO in 2001 pushed its trade openness to the highest point—higher than the world average and the levels of the UK and US (Figure 2).
China is said to have been the largest beneficiary of globalisation until the economic crisis hit in 2008. After the economic crisis, the international market became weak and the Chinese economy could no longer count on export as its most powerful economic ‘carrier’ (besides investment and consumption). Immediately following the crisis, the Chinese government injected 4 trillion renminbi (RMB) into the economy and boosted short-term investment and consumption. Its long-term plan, which was not clear until 2012, is to further stimulate trade openness and integration into the world economy. China thus seeks to leverage the global market and resources to boost its economic growth.
At the helm of rebuilding globalisation efforts?
China does not only want to continue to benefit from globalisation, but also wants to lead the rebuilding of a global system where it could assume a leading role. The current deglobalisation phenomenon does not mean that the general globalisation trend will cease, because the core driver of globalisation is technology, which is advancing faster than ever. However, it does suggest a splintering (if not collapse) of the current globalisation system created after World War II and shaped to its current state largely by developed economies.
Trumpism and Brexitism are both symbols of the deglobalisation phenomenon but are not evidence that the traditional leaders of globalisation are deglobalising their economies. Instead, such symbols show the recognition of the need for a new globalisation system by both ‘traditional’ world leaders like the US and UK as well as emerging powers who were largely excluded from the last global rulemaking process and now hold a share of the world GDP so significant that they cannot be ruled out again.
However, globalisation in China has always been selective, well-managed, and restricted mainly to economic and trade-related activities. Besides its achievement regarding global trade, China shows little achievement or/and willingness to be globalised in terms of, for example, finance, human resources, and culture. The exchange rate is under careful control. English education in China is mandatory since middle school, but the real usage of English is still quite limited. China is known to be the most difficult country for foreigners to attain residence permits, and to date it blocks direct access to the global internet. These are all signs that Beijing is not too eager to participate in all forms of globalisation.
China needs to tread carefully
And thus its attitude may jeopardise China’s idea of globalisation through the OBOR initiative. The explanation often used by Chinese government for the selectivity related to the initiative is its desire to minimise the negative effect of Western-Defined Globalisation and to respect China’s special country situation. However, China’s attitude towards the OBOR must be open-minded and holistic, both tolerable of and acceptable to a wide range of ideologies.
The Chinese government seems to realise that and is promoting the OBOR as ‘the most inclusive globalisation system’. Formally, the OBOR emphasises five key areas of cooperation, including economic, financial and social exchanges, and the private sector is encouraged and expected to be the main driver of the initiative. Unfortunately, the current situation suggests that OBOR has been largely driven by state-owned enterprises and government-level trade agreements, and is limited to global trade. The areas that are not engaged by the plan, such as culture, education, data sharing and immigration, are likely to hinder China’s efforts towards globalisation, especially in a digital world where technology is developed at such a high speed.
In conclusion, China will continue to seek leadership in restoring the globalisation system, with the OBOR initiative as its core measure. However, both traditional leaders and other emerging powers still have a say in how and whether the globalisation system is re-established. Consensus may not have been reached between countries, but the globalisation trend is likely to continue—and at a faster pace due to new technologies. If China truly wants to become a major global leader in the quest to ‘restart’ globalisation, private sector involvement in areas other than trade need to be encouraged through a more open-minded attitude.
Chenmei Li is a Project Analyst at Institute of New Structural Economics, Peking University—one of the top 25 think tanks in China. She is working on economic transformation of developing countries (especially in Africa) and China’s engagement with LDCs. She received a Master’s degree from the ISS in 2016.