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More often than not, economic growth has been seen to occur at the detriment of the environmental protection. The policymakers are now faced with the challenges of reconciling the duo (Carbaugh, 2008). However, these twin goals are widely seen as antithetical: promotion of one often undermines the other.
Debate on whether unrestricted international trade will harm or help the environment is envisaged in proposals for the General agreement on Trade and Tariffs (GATT) and the North American Free Trade Agreement (NAFTA). Different economists have advanced varied views on this subject(Gallagher, 2007). According to Jagdish Bhagwati of Columbia University, freeing trade from inefficient restrictions may be the best way to achieve environmental protection while at the same time safeguarding prosperity and liberty. Herman E. Daly of the World Bank, on the other hand believes that free trade left to itself may harm both the environment and human welfare.
The North American Free Trade Agreement (NAFTA) has illustrated cases in which corporations have challenged environmental regulations as barriers to trade (Gallagher, 2007). For instance, The Canadian asbestos industry sought to remove U.S. restrictions on the sale of cancer-causing asbestos products, while the U.S. pesticide industry challenged strong Canadian pesticide regulations. In the fist instance, the U.S based Ethyl Corporation managed to reverse a Canadian ban on the importation and sale of the gasoline additive MDMA, a chemical suspected to cause nerve damage (Carbaugh, 2008).
Expansion of trade may have direct and indirect beneficial effects on the environment. The theory of Comparative advantage is a good example. According to this theory, trade enables countries to become more efficient in their use of resources, as a result conserving resources and avoiding waste. By removing distortionary subsidies and pricing policies, trade liberalization leads to improved efficiency in resource allocation. Widespread subsidies on chemical fertilizers and pesticides, for instance, promote environmentally harmful farming methods. In international trade agreements, such subsidies to domestic producers are generally prohibited. Doing away with these subsidies would not only promote economic efficiency but will also ensure environmental sustainability (Kuhn & Bernauer, 2006).
Free trade may also promote the spread of environmentally friendly technology. Many developing and formerly communist nations, for instance, still rely on old, inefficient, high-polluting power plants for energy production. With trade, these plants can be replaced with modern, highly efficient combined cycle facilities (Esty, 2007).
In the environmentalist's perspective, NAFTA, agrees that globalization of trade can also create "boomerang" effects through the transboundary exchange of externalities (Carbaugh, 2008). Poor application of pesticides without safety precautions may lead to harmful effects. These harmful effects may be returned back to the United States through fruits containing residues of dangerous chemicals (Kuhn & Bernauer, 2006).
We can conclude that, a successful global economy must therefore be characterized by both resource and environmental limits. Special attention also needs to be accorded to the developing nations. The effects of expanded trade in terms of social and ecological impacts must be evaluated. At the global level, most important reform would be to set up a World Environmental Organization (WEO) with the objective to counterbalance the World Trade Organization (WTO). This would create a global environmental advocacy organization. However, this might lead to conflict and deadlock with other transnational institutions. "Greening" existing institutions, broadening the environmental and social provisions of GATT's Article XX, and altering the missions of the World Bank and International Monetary Fund, would be yet another approach to emphasize sustainable development objectives.
Building environmental sensitivity into the trade regime in a thoughtful and systematic fashion should therefore be of utmost interest to the trade community as well as environmental advocates." Similarly, achieving this goal will be a major challenge for trade negotiators at both regional and global levels for the foreseeable future.