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Does Freer Trade Mean Lower Environmental Standards?

Environmentalism and the FTAA

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The primary concern of the environmental lobbies is that further trade liberalization through the Free Trade Area of the Americas (FTAA) initiative will have adverse consequences on the environment. Their first point is that international trade law under World Trade Organization (WTO) regulations provides an incentive to lower domestic environmental regulations, so that domestic producers will be on a "level playing field" with foreign competitors. The second concern is that the General Agreement on Tariffs and Trade (GATT) policy of "product, not process" prohibits the discrimination of imports based solely on the methods of production, a practice which induces foreign producers to use the cheapest (and environmentally costly) processes, knowing that their products will receive equal treatment as those made with "environmentally-friendly" production techniques. The first question in evaluating the lobbyists' contentions is to determine to what extent trade liberalization has negative implications for the environment--is it really something we should worry about? And if so, what needs to be done to ensure a global community that promotes both international trade and environmental preservation?

The integration of the world economy and the imperative to protect the environment are two of the most powerful global trends that have emerged in recent decades. These forces have produced a conflict of interest between free-traders and environmentalists, as their advancements are commonly viewed as mutually exclusive. Environmental groups show a growing concern over the FTAA initiative, fearful that multinational corporations will move their production facilities to South America where the environmental regulations are less stringent. They claim that the WTO's refusal to implement environmental policies will lead to a "race to the bottom" in environmental standards among nations. Specifically, the Sierra Club argues that "the FTAA could have a severe impact on our health and environment at home and throughout the Americas. It could expose more of our health and environmental laws to attack as trade barriers and encourage destructive mining and logging in some of our hemisphere's most precious wild areas" (Sierra Club).

The aforementioned concerns are legitimate and theoretically sound. Firms want to produce where they have lower costs of production, and avoiding pollution reduction techniques is a cost saver. Domestically, producers could claim foreign production facilities and firms have an unfair advantage because of lower environmental standards, so business lobbies would pressure for lower domestic standards in an effort to stay "competitive" with goods produced abroad. One of the most famous examples of international trade policy under the GATT colliding with domestic environmental policy is the tuna-dolphin dispute between the U.S. and Mexico.

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