Reducing trade barriers can benefit environment

UW-Madison economist says trade barriers have led to environmental damage in Southeast Asia

Ian Coxhead considers himself an environmentalist, but he wasn’t happy with the environmentalists he saw on the news from the World Trade Organization talks in Seattle.

“Trade liberalization is not necessarily bad for the environment,” says the UW–Madison economist, who has spent 10 years studying the interactions among trade regulations, agriculture and the environment in Southeast Asia. “Opening trade sometime makes things better for the environment and sometimes makes things worse.”

“When people in a country are concerned about environmental damage, they rarely use trade restrictions to protect the environment. They’re much more likely to implement regulations to protect environmental quality.” Ian Coxhead Agricultural and Applied Economics

Coxhead is angry that protestors misrepresented the relationship between trade and the environment, and attacked the WTO as a way to protect the environment. “It’s easy to point fingers at the WTO, which could certainly improve as an organization,” he says.

Coxhead believes environmental advocates would be much more effective if they worked to change environmental laws in countries around the world than by making the WTO their prime target. “When people in a country are concerned about environmental damage, they rarely use trade restrictions to protect the environment,” he says. “They’re much more likely to implement regulations to protect environmental quality.”

“In developing countries, people realize that trade improves their lives,” says Coxhead, who wants to see countries develop in ways that are environmentally sustainable. “To see why, you need only compare the living standards of similar countries with historically different trade policies. Openness to trade permits specialization and promotes greater efficiency. Those in turn help incomes rise more quickly. More inward-oriented economies typically grow more slowly in the long run, and so have less success in alleviating poverty.”

Coxhead, with the Department of Agricultural and Applied Economics in the College of Agricultural and Life Sciences, currently has major research projects in Thailand and the Philippines. There he’s documented situations where trade barriers have increased environmental damage.

Developing countries are most likely to erect trade barriers around their capital-intensive industries, such as steel, fertilizer and plastics, according to Coxhead. Those same industries tend to be among the major polluters.

“In Thailand, the industries protected by the highest trade barriers include plastics, power generation, mining, tanneries and textiles,” Coxhead says. “If the country lowered import barriers, some of the most heavily polluting industries in Thailand would likely close down. Instead, Thais would buy those products from other countries that could make them using cleaner technologies.”

In the Philippines Coxhead has also seen the effects of the government’s decision to ban the imports of corn, potatoes and certain other vegetables in the 1970s.

“The policy was instituted because Filipinos believed it would help poor farmers and make the country self-sufficient in those crops,” he says. The trade protection measures produced an agricultural shift in the country. Because of problems with plant diseases in the moist, warm lowlands, farmers now grow corn, potatoes and cabbage on erodible soils in the uplands on sites converted from long-term uses such as forest, pasture or perennial plantation crops like coffee.

Because perennial crops produce relatively little erosion, the policy has greatly increased soil erosion and surface water pollution, according to Coxhead. “Now the price of corn in the Philippines is twice the world price and the country imports coffee, a crop it once exported,” he says. “Trade liberalization would diminish all those problems.”

Coxhead’s research was supported by state funding to the College of Agricultural and Life Sciences and by grants from the United States Agency for International Development and the Ford Foundation.