Effect of Foreign Trade on Environment!
No definite patterns can be observed on the effect of foreign trade on environment. There is however, a fear that as a consequence of rapid growth related tendencies, massive and irreversible environmental problems can take place. This situation can be avoided provided right policies and institutions to address such trends are initiated at the right time.
Three patterns that have emerged in regard are as follows:
i. Some environmental problems get reduced in intensity as income increases:
This is because increasing income provides the resources for public services such as sanitation and rural electricity. When individuals no longer have to worry about their day-to-day survival, they can devote resources to profitable investments in conservation. The positive relationship between economic growth and environmental quality cannot be underestimated.
ii. Some problems initially worsen but then improve as incomes rise:
Most forms of air and water pollution fit into category, as do some- types of deforestation and encroachment on natural habitats. These are however nothing automatic about this improvement as such improvements occur only when governments deliberately introduce policies to ensure that additional resources are devoted to dealing with environmental problems.
iii. Some indicators of environmental stress worsen as incomes increase:
Emissions of carbon and nitrogen oxides and municipal wastes are examples for this. In these cases, abatement is relatively expensive and the costs associated with the emissions and wastes are not yet perceived as high-often because they are home by someone else. The key, once again, is policy and institutions.
More generally, individuals and firms have few incentives to cut back on wastes and emissions, and until incentives are put in place-through regulation, charges, or other means-damage will continue to increase. The experience with the turnarounds achieved in some other forms of pollution, however, shows that once a policy commitment is made results can be achieved albeit slowly.