Argument: Free trade and markets benefit the environment

Issue Report: Free trade


  • “Is Globalization Causing A ‘Race To The Bottom’ In Environmental Standards?”A 1998 World Bank study of organic water pollution found that pollution intensity fell by 90 per cent as per capita income rose from $500 to $20,000, with the fastest decline occurring before the country reached middle income status (Figure 6. Hettige, Mani and Wheeler, 1998). Average air quality in China has stabilized or improved since the mid-1980s in monitored cities, especially large ones – the same period during which China has experienced both rapid economic growth and increased openness to trade and investment.
  • “Is Globalization Causing A ‘Race To The Bottom’ In Environmental Standards?” In East Asia in the 1970s, . the fast growing “Tigers” (Korea, Taiwan (China), Singapore and Hong Kong) began to export more of certain highly polluting sectors, while Japan began to reduce its exports in these sectors. However, this trend diminished in the 1980s, and a stable pattern emerged with the Tigers importing somewhat more than they export in the highly-polluting sectors. A similar pattern occurred in trade of polluting sector products between North America and Latin America. In China the share of the five dirtiest industries in total industrial output has fallen, while imports of pollution intensive products have actually increased. (World Bank, 1997).

Markets and free trade do better than state-intervention in producing positive environmental results

  • Martin Wolf, Why Globalization Works?. Yale University Press. 2004. ISBN 0-300-10777-3. pp 56. – “Business is supposedly indifferent to the environment. That, indeed, is one of the principal criticisms of a market economy. Yet, we now know that supposedly benevolent state-socialist economies were environmental catastrophes. The market economy has avoided these disasters for at least four reasons: first, it provides the means for independent critics of environmental abuses to flourish; second, it generates the prosperity that makes people concerned about the environment; third, it implies a separation between companies and the government that makes independent regulation possible; and finally, companies are concerned about their reputations and will act to protect them, in response to campaigning against them. For these reasons, effective environmental pressure groups have emerged only in market democracies.”

Companies must maintain an environmentally sound reputation or suffer market consequences

  • “Is Globalization Causing A ‘Race To The Bottom’ In Environmental Standards?”Two recent empirical studies (Wheeler 2001; Jaffe and others 1995) do not find that countries have lowered their standards to attract foreign investment or to increase exports. Wheeler analyzes data on air quality in the industrial heartlands of three major new globalizing countries; Brazil, China and Mexico. He finds that far from experiencing a race to the bottom, all three have registered improvements in air quality. Countries do not become permanent pollution havens because along with increases in income come increased demands for environmental quality and a better institutional capacity to supply environmental regulation. One World Bank study of 145 countries identified a strong positive correlation between income levels and the strictness of environmental regulation (Figure 7. Dasgupta, Mody, Roy and Wheeler, 1995


See also