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The Founex Report - Corrective Action

1.9. The problems are already severe enough in developing countries. But in the absence of resolute action, they will tend to attain formidable dimensions in the decades ahead. The very growth of population, when not accompanied by adequate economic development, brings out the prospect of rising unemployment, further impoverishing the countryside and swelling the drift to the towns and creating human problems of the deepest intensity. They can only aggravate the serious social and political tensions that even now prevail in these societies. There can indeed be little doubt about the urgent need for corrective action.

1.10. These issues are elaborated upon in succeeding chapters of this report. To the extent that some of the advanced environmental consequences of the process of development could be avoided by better planning and regulation, the developing countries have an opportunity to profit from the experience of the advanced countries. The importance of establishing adequate safeguards and standards in project planning and preparation is thus underlined. These standards must necessarily be those that are appropriate to the specific conditions of these countries and be capable of being observed within the resources available to them. All this reflects the vital importance of data and of research. It also raises the question of the instruments by which environmental policies could be implemented, particularly in situations where decisions are undertaken by private investors, whether domestic or foreign, in the context of market forces.

1.11. Environmental issues may come to exercise a growing influence on international economic relations. They are not only a formidable competitor for developed countries' resources (which in some instances might have been channelled towards development assistance), but they are also a factor which, to an ever increasing degree, could influence the pattern of world trade, the international distribution of industry, the competitive position of different groups of countries, their comparative costs of production, etc. Environmental actions by developed countries may have a profound and manifold impact on the growth and external economic relations of developing countries.

1.12. Some environmental actions by developed countries (restrictions on the importation and use of certain commodities, imposition of environmental regulations, standards and other non-tariff barriers on imports as well as increased production costs reflected in higher export prices) are likely to have a negative effect on developing countries' export possibilities and their terms of trade. Recycling of raw materials may also tend to diminish the volume of primary commodities consumed and imported into developed countries.

1.13. In some fields, environmental issues open up new possibilities for developing countries. The structural changes in production and trade, as well as the geographical relocation of productive enterprises which might be necessitated by environmental considerations, should provide new opportunities for meeting some of the developmental needs of the developing nations. This relates first of all to the relationship between natural and synthetic products and the reopening of certain markets to exports of natural products. In some cases, developing countries might have a possibility of increasing the inflow of foreign capital and of creating new industries. If such opportunities are to be fully realized, they will require new and concerted measures on the part of developed and developing countries in the fields of international trade and investment, as well as in the control of private foreign enterprises.

1.14. The desire to retrieve some of the past damage to the environment and to minimize the environmental cost of future development will, in most cases, represent a new claim on productive resources and an additional element in the cost of production. Some of this burden may be reduced in the future as science and technology itself responds to the needs of environmental management. Still, one of the major questions which would arise from the increased concern with the preservation of the environment is how the higher cost of future development would be shared as between developed and developing nations. There are misgivings in the developing countries that, given their peripheral role in the international economy, arising not only from their present low economic capacity and bargaining power but also from a declining relative share in world trade and the increasing gap in per capita income, they might not be able to take full advantage of the fresh opportunities that may arise from environmental control, while at the same time they might have to bear part of the extra burden which such control would entail. The increased cost burden arising from greater attention to environmental problems should be accompanied by a greater willingness to provide additional assistance and induce a greater effort to reduce the inefficient allocation of productive resources arising from indiscriminate protection of agriculture and industry in both developed and developing countries. It certainly should not provide fresh argument for even greater protection.