Trade Liberalization On The Environment Essay

Mobility has allowed human civilizations throughout history to reap the benefits of unrestricted, intercontinental trade, but there are environmental costs as a result which are not immediately apparent. There is no doubt that trade between nations has depleted natural resources, but the question as to whether current trade policies augment or temper environmental degradation is currently under contention. One view is that environmental regulations will create "pollution havens" in countries where there are less stringent regulations, simply relocating environmental damage to a country where the environment is worth less. The opposing view comes in the form of the "Porter hypothesis" named for Michael Porter and his suggestion that stringent

The manner by which the environment is being harmed is much different now than it was in the 1400's. Production byproducts rather than the actual production are the cause of current environmental degradation. However, economic analysis has proven that environmental protection is a normal good. A normal good or service in economic terms means that the demand for such items increases as income increases. As such, for the sake of the poor as well as the environment, policy makers with the aim of environmental protection should also consider their effects on the resulting, generally decreased level of production. What is the socially optimum level of production keeping in mind the environment? How should it be achieved? It is at this point that the great economic minds of out time begin to take up arms. Michael Porter, a Professor of Business at the Harvard Business School claims that environmental regulation of businesses will actually give the businesses a competitive advantage over their counterparts in nations with less stringent regulation because it forces them to innovate. Porter claims that by changing their production processes, the businesses will actually lower their production costs (Porter, 97). This claim has become commonly known as the "Porter hypothesis". If the Porter hypothesis is true, environmental regulation will increase production and environmental standards with easy legislative action. The issue that other economists have with this idea is that the hypothesis assumes that the businesses will not just move their manufacturing plant to avoid the costs of cleaner production practices. As such, the opposing "pollution havens" hypothesis was developed in response. The theory behind this hypothesis is that