Economic Globalization and the Environment

Vocabulary FDI – Foreign Direct Investment – Investment in one country by firms owned in another country Pollution Haven – A country that, because of its weak or poorly enforced environmental regulations, attracts industries that pollute the environment MEA – Multilateral Environmental Agreement

Vocab. Cont. “Race to the Bottom” – The idea that, if one country provides a competitive advantage to its firms by tax regulation (ex/ Environment), then competing firms in other countries will demand even weaker regulations by their governments, and regulation will be reduced to minimal levels everywhere

Vocab. Cont. Sustainable Development – forms of economic development and activities that do not deplete or degrade the natural resources upon which present and future economic growth and life depend

A Global Environment Globalization, by definition, is a world wide phenomenon, and as such, has a great impact on global environmental issues.

Environmental Issues are not bound by Political Borders We are increasingly aware of the way the Earth’s environment has been changed by human activity We are also aware that nature pays no attention to national borders, which may limit individual government’s ability to protect the environment in a “globalized” world

What We Cannot Control While laws attempt to control the flow of capital, goods and even people, no political entity can control nature and the subsequent impacts on the environment, such as the way winds blow greenhouse gases or where ocean currents carry oil or waste.

Cooperation One nation might pass strict environmental protection laws, but they will have little effect if neighboring countries do not pass similar laws Only GLOBAL agreements, therefore, can truly get all nations to act together to improve the environment Because of this, some of the first truly global civil movements have been those which intend to protect the environment

Trade (Economic Globalization) and the Environment) Capital, technology and goods and services flow across national borders at a rapid rate Nearly $US 20 Billion in capital flows around the world EACH DAY Trade liberalization – freer trade – drives globalization Therefore, the major channel through which globalization impacts the environment is trade

Trade Cont. World Trade has grown faster than world output – ex/ The amount of trade has increased more than the number/quantity of goods traded – therefore increasing trade intensity Given that trade affects the environment, we can assume that as trade becomes more intense, so might the effects in the environment

Effect of Trade on the Environment Free trade theoretically maximizes the efficiency of resource allocation by channeling economic activities to least-cost producers…So, if natural and environmental resources are correctly “priced”, or set, theoretically the least environmental damage should occur Evidence seems to support that: The scale/intensity of economic activity has negative effects on the environment; however Technology and income that globalization generate have beneficial effects

Perspectives on Globalization and the Environment One Perspective: Globalization of trade has beneficial impacts on the environment Globalization diffuses (spreads) capital and technology; this could diffuse clean technologies worldwide and therefore lead to less harmful impacts on the environment Globalization diffuses world product standards – generally set by the developing world – which may create a trend toward rising standards globally (because environmental standards are higher in the dominant consumer markets

Perspectives Cont. Another Perspective: Globalization of trade has a negative impact on the environment Globalization could reduce economic prospects in individual countries, sectors and industries due to loss of markets through competition with other global suppliers In an effort to be competitive, countries may rely on resource depletion or lax environmental standards which may lead to a “race to the bottom”

Globalization and Governments’ Ability to Enact Environmentally Beneficial Legislation On one hand, globalization places constraints on national governments and enhances the role of the international market in economic social and environmental outcomes On the other hand, globalization creates new imperatives for states to cooperate in coordinating domestic environmental policies This has led to the growth of multinational (or international) agreements to try to protect the environment; such agreements are called Multilateral Environmental Agreements or MEAs

Current MEAs See list in handout

MEAs The United Nations has been instrumental in driving this move toward cooperation between nations in protecting the environment

The Kyoto Protocal “We do not inherit the Earth from our Ancestors, we borrow it from our children.” - Native American Proverb …Questions for discussion in booklet…

Environmental Protectionism Stewardship: The careful and responsible management of something entrusted to one’s care Environmental Stewardship: The idea that the earth and its resources do not belong to us, but are entrusted to us to look after to pass on to further generations

Sustainable Development Development that ensures that the sue of resources and the environment today does not damage prospects for use by future generations. Sustainable Dev. Questions in booklet…discuss…

Global Environmental Issues What are some Environmental problems arising from human activities that affect the world? Are there ways to solve these problems? Does the fact that our world is becoming more and more globalized make solutions to these problems easier to accomplish, or more difficult?