Green Goals as Trade Barriers

Blog post By Karun Tyagi

International trade is a key driver of economic growth and can have important implications for the environment but the trade measures to achieve environmental goals should not lead to arbitrary and unjustifiable discrimination and encourages countries to avoid taking unilateral action to address environmental challenges outside the jurisdiction of the importing country and to address transboundary or global environmental problems based on international consensus.


The impact of international trade on the environment is complex. Trade drives economic growth, a key element of green growth and sustainable development. However, economic growth can exacerbate environmental harms, whether it be through increased greenhouse gas emissions, deforestation, or loss of biodiversity. 


The approach of green trade policies is controversial because many developing countries are afraid that an ecological transformation of the economy will mask protectionist restrictions of international trade that will reinforce the inequality between rich and poor countries and hamper development.


Rio+20 underscored the role that trade has to play in the achievement of sustainable development. Along with financing, technology, and capacity-building, trade is known as an “implementation tool”. It is indeed essential that trade liberalization, environmental protection, and socially inclusive development do not become conflicting goals.


Many developing countries are skeptical about the removal of trade barriers for a green economy, fearing the green economy is being used as a pretext for gaining access to their markets. They are also concerned about having to compete with subsidized products in industrialized nations – without being able to take equivalent measures of their own. Any liberalization package should therefore be backed by financial and technical support that enables poor countries to become more competitive in environmental goods and services.


The second important issue is environmentally harmful, trade-distorting subsidies, like those on coal and oil. According to the United Nations Environment Programme (UNEP), the abolition of subsidies on fossil fuels in the industrial and energy sectors could reduce global greenhouse gas emissions by 6 percent owing to the consequent decline in demand.  While subsidies on fossil fuels are often defended as being socially inclusive anti-poverty measures, the International Energy Agency (IEA) claims that the poor benefit from only 15 percent of them, the remainder going to the middle class, the people who own cars and air-conditioning units. 


The use of trade measures to achieve environmental goals, however, needs to be balanced against the role of international trade as a driver of economic growth and development.


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Image source: Shutterstock


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