Impact of trade on the environment depends on the structure of each country, says WTO

In a report released this Tuesday (16), the WTO (World Trade Organization) states that opening up trade can increase or decrease deforestation, depending on the institutional structure of the country.

According to the World Trade Report 2021, changes induced by trade opening in relative prices can lead to more investments and exports without leading to the overexploitation of natural resources, provided that efficient collective resource management policies exist.

For the WTO, restricting trade in the presence of weak institutions can have counterproductive effects, due to the creation of parallel markets. The report cites as an example a study on the effects of restrictions on mahogany trade in the Brazilian Amazon, which would have generated an illegal market and increased violence in the region.

On climate change, the organization says that the increase in international trade will not necessarily lead to more emissions. Commerce can sometimes reduce them, says the organization, if the negative impact of the domestic product is greater than that of the imported product added to transport emissions.

A study cited shows that, in general, trade benefits the environment in richer countries, considering those that are part of the OECD (Organization for Economic Cooperation and Development), and has the opposite effect in less developed ones.

Furthermore, trade can allow for the incorporation of green technologies into production processes.

“Considering the different effects, the overall impact of trading on emissions is likely to be minimal, and the key to tackling climate change is to enable trade in environmentally sound goods and services while limiting the negative impact of trade and energy. trade barriers,” says the report.

According to another study cited, in most countries, import tariffs and non-tariff barriers are substantially lower for “dirty” industries, which emit greater amounts of CO2, than for cleaner industries.

“This difference in trade policy creates an implicit subsidy on carbon emissions and contributes to climate change,” says the WTO.

In the report, the organization argues that trade relations make the world more vulnerable to shocks, such as natural and man-made disasters, but it also makes countries more resistant to them.

Thus, policies that seek to reduce trade integration, promoting self-sufficiency, can often have the opposite effect, reducing the economy’s resilience.

The WTO claims, for example, that trade-related human and animal mobility can help spread epidemics. Isolating countries and restricting trade relations, however, may not be the best way to avoid the problem, according to the institution.

The WTO says, for example, that less exposure to international mobility can result in other problems during pandemics. More isolated countries may develop lower cross-immunity to reduce damage from new communicable diseases.

In addition, exposure to international mobility will likely allow countries to develop higher incomes, stronger health systems and greater capacity for innovation, which could reduce pandemic-related harm, says the WTO.

The organization also says that it will be necessary to strengthen the resilience of the world economy in the coming years through greater openness.

“While the WTO is already contributing to economic resilience in important ways, it can and must do more as we face a future of increasing natural and man-made hazards and disasters,” says the organization’s director general, Ngozi Okonjo- Iweala, in the document.

According to the director-general, ongoing negotiations at the WTO on services, investment, agriculture, electronic commerce and micro, small and medium enterprises can create more opportunities for inclusive trade and diversification, making economies more resilient in the future.

“Reinvigorated international cooperation, not a retreat into isolationism, is the most promising path.”