Before addressing its nefarious effect on regulators, consider the respects in which economic integration promotes environmentally damaging activities. Some assert that trade promotes capital-intensive, and therefore pollution-intensive industries. This claim seems dubious: Free trade is much more likely to encourage labor-intensive industries. Products produced by capital- (and presumably pollution-) intensive industries such as heavy machinery, automobiles, etc. are cumbersome to transport and therefore less likely to benefit from trade. Bulk labor-intensive goods such as clothing, footwear and electronics are easily transported and therefore more likely to be traded globally.
It seems rather more likely that a lack of trade would promote environmentally damaging activity by fostering inefficient resource use. A country that chooses to close its ports may not import from the world's most efficient producers and therefore may create environmentally damaging inefficiency in those industries for which they are poorly suited. Consider a country that lacks natural energy sources. While trade would allow it to import cleaner oil or natural gas, self-sufficiency would demand the use of lumber. Markets allow the flow of resources to their efficient use while isolation traps resources.
Many of the accusations leveled at global economic integration would be more accurately directed at its most valuable upshot: growth. In recent decades liberalization and participation in the global market have proved the magic ingredient for growth in developing economies. An unfortunate side effect of economic growth is increased pollution; of this there is little dispute. However, accepting this, what is optimal policy? It seems unlikely that the First World will or even could give up its growth and corresponding standard of living. That established, it would be hardly fair to deny impoverished developing countries the standard of living the developed world enjoys. This would be intolerable hypocrisy. It seems instead we should allow open sharing of resources and technology as to encourage sustainable and efficient growth.
In addition to its purportedly harmful direct effects, some claim that global economic integration, principally free trade, has fostered a regulatory "race to the bottom." This account would have free trade allowing companies and investors to shop regulatory climates, pitting developing nations against each other in a race to deregulations. This is both tolerable and unlikely. Free trade allows countries to regulate according to their ability to endure pollution. Those countries for which pollution is least costly will be able to offer the most lax regulations and host the most pollution-intensive industries. It should be recognized that this comparative advantage in resource-intensive and polluting industries is the same stepping-stone the United States used to improve the standards of living of its citizens. To deny this aid to the developing world would be intensely hypocritical, especially in light of claims from the same individuals that globalization offends local autonomy. Should developing countries value increased productivity over pollution reduction, it is their autonomy that allows them to create corresponding regulations, not any "race to the bottom."
While the "race to the bottom" is compelling, and as we discovered, an invaluable tool for development, it is in some respects fictitious. Princeton University economists Alan Krueger and Gene Grossman have found that economic growth generally initially harms the environment, but environmental care quickly grows with production. As an economy becomes more prosperous, it may worry less about its next meal and begin to develop an interest in environmental protection. In this respect, environmental quality behaves as a luxury good. The World Bank has found as per capita income climbs from $500 to $20,000, pollution intensity falls 90 percent. Additionally, the "race to the bottom" among developing countries may be refuted by the current regulatory climate. By nearly any indicator barriers to trade are the lowest in developed countries. The CATO Institute's Economic Freedom Rankings in 2004 are dominated at the top by developed countries, while developing nations often score lowest.
While the accusation that global economic integration is popular, it is fatally flawed and beset upon at every turn by hypocrisy. Should we obstruct growth in underdeveloped and impoverished countries in the name of protecting their environments? This policy of keeping the poor poor is likely to prevent them from ever reaching the point at which they will begin to demand environmental quality. In order to protect the autonomy of developing nations so threatened by the "race to the bottom," should we limit their ability to create regulatory structures that represent their tastes for environmental quality and growth? To do so would be a flagrant violation of their autonomy and would likely produce inefficient resource use. Rather, we must realize that everyone is entitled to the stepping-stone we so gainfully employed and work to promote efficiency and sustainable growth.
McClellan can be reached at chmclellan@amherst.edu