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The Founex Report - International Economic Relations

Chapter Four: Implications for International Economic Relations

4.1. We have discussed in the earlier part of our Report the changing nature of environmental issues in the development process and environmental policies relevant to different stages of development. While we believe that continued development is the only answer to many of the environmental problems of the developing countries, we also believe that these countries cannot afford either to neglect the environmental problems or to treat environment as a free resource as the presently developed countries too often did in their initial stages of economic progress. The character of these problems, of course, is quite different in the developing countries and the priority to be given to them in resource allocations is a critical issue, but what is important is that the long-term costs of environmental problems are fully understood and reflected in the current planning policies of the developing world.

4.2. Even if the developing countries were to regard the present environmental concern of the developed countries to be an irrelevant irritant, they can hardly remain indifferent to, or be unaffected by it. Inevitably, the environmental concern will cast its shadow on all international economic relations. One can perceive these international implications only a little dimly at this stage: much more thought and research work is needed before the outlines become any clearer. But it is important to anticipate the adverse implications for international economic relations on the one hand and the great opportunities which may open up on the other, and then to suggest policy measures and institutional arrangements which could reduce the former and maximize the latter. There is, in fact, no other choice if a confrontation between the developed and developing countries is to be avoided.

4.3. There are growing fears in the developing world that the current environmental concern in the deve1oped countries will affect them adversely in the fields of trade, aid and transfer of technology. Some of these fears may be no more than the inherent fears of the weak in any confrontation with the stronger members of the international community. But it is important that they be articulated clearly, analysed objectively and provided for in any international arrangements which are made.

4.4. There is a fear that the insistence of the developed countries on rigorous environmental standards of products exchanged in international trade may well give rise to a "neo-protectionism". Many of the developed countries will be loth to see their production and employment suffer if their export prices rise as environmental standards are enforced; they may try to argue that imports from the developing countries based on less rigorous environmental standards should either be taxed or banned. The import-competing sectors and organized lobbies are likely to join in this outcry. Agricultural products may be the first to suffer. Some industrial products, notably chemicals, may fare no better. And from specifics, the argument can quickly go on to a general level. Why be liberal in admitting the products of the developing countries if they are the outgrowth of a "sweated environment"? The humanitarian concern for environment can far too easily become a selfish argument for greater protectionism. The developing countries still confront the argument of "sweated labour": the argument of "sweated environment" will be equally fallacious but even harder to beat.

4.5. In analysing these fears regarding trade disruption, we have to make several distinctions. First, there may be some exports of the developing countries (e.g. lead, high sulphur fuel) which are increasingly displaced by the development of a non-pollutive technology. The recycling of raw materials may also reduce the demand for some primary exports from the developing countries. This is merely the outcome of technological advancement and all that we can suggest is that there should be an anticipatory study of such export threats, development of an early warning system and measures to enable the seriously affected countries to restructure their investment, production and exports. Second, as has already happened in the case of some products on sanitary grounds, there is the possibility of a rise in non-tariff barriers against those exports of the developing countries which carry some environmental hazards. Dairy products, fish, meat, fruits and vegetables are among the likely products where the developed countries may enforce very high environmental standards. Already the import of fruits and vegetables carrying traces of DDT has been banned in certain European countries. Insofar as the standards enforced in the developed countries are primarily meant to prevent health hazards and some international agreement is reached on maximum acceptable standards, it should not be interpreted as a discriminatory move against the exports of the developing countries. But in the meantime action should be taken to cushion the disruptive effects of such measures on the trade of the developing countries through a system of prior consultation and warnings by the developed countries of environmental actions contemplated by them. In certain cases, the possibility of channelling additional aid toward adapting export industries in developing countries to the new requirements in developed countries or towards a diversification of their exports should also be studied.