October 22, 2017

Cambridge debate

An address given at the “Trade and the Environment” debate held at The Prince of Wales’s Business & the Environment Programme, Madingley Hall, Cambridge on 13th September 1994.

The debate was part of a broader seminar entitled “Global Sustainability: Emerging Scenarios”.

First, one must realise just how serious are the environmental problems we face today, and how dramatic must be the changes required to our way of life and the way our society and the economy are structured if we are to maintain the habitability of our planet. Robert Goodland, a leading ecologist at the World Bank, notes that it is not possible to find a sample of ocean water with no sign of the 20 billion tons of human waste added annually. David Pimental of Cornell University, a leading authority on world agriculture, estimates that 35% of the world’s arable land has already been degraded, and that worldwide soil loss rates exceed soil formation rates by at least a factor of 10, while erosion, salinisation and water logging are leading to a loss of some 6 million hectares a year. Goodland notes too that we have already destroyed 55% of the world’s tropical forests, and that we are losing every year about 160,000 square kilometres of what remains. Biodiversity, he also notes is being reduced at a terrifying rate—estimates ranging from 5,000 species of animals and plants a year to his own estimate of 150,000.

The ozone shield that protects us from biologically destructive ultra violet radiation, is being rapidly depleted—even if CFC production stops today it will continue to deteriorate for at least another 10 years, creating conditions that must, among other things, dramatically increase the incidence of skin cancer, seriously impair our immune system, and make us more vulnerable to both infectious and degenerative diseases. He also notes that the impact of the human economy on natural ecosystems is now so great that it uses directly or indirectly about 40% of the net primary product (NPP) of terrestrial photosynthesis today. The doubling of its impact, which may not be far off, would mean consuming 80% of the NPP. Further demographic and economic growth would lead us theoretically to consume 100% or more not long after—all of which is clearly impossible.

Finally, Goodland warns that the most serious problem we face is global warming, which I think should be referred to more accurately as global climate destabilisation, a process which was probably already started and which in any case must start affecting us very soon. Though Goodland doesn’t say it, if we allow climatic destabilisation to continue unchecked, then it is only a question of time before we will have created climatic conditions to which complex forms of life, including man, will simply not be able to adapt. I doubt if any serious student of these issues would dare contradict me on this point. All these problems have been documented ad nauseum yet neither industrialists nor politicians nor international agencies have even begun to take any serious measures that could conceivably solve them.

The reason is clear. If our environment is deteriorating so fast it is that the impact on it of our economic activities and to a far lesser extent of population pressure, is far greater than it can sustain. There is only one answer to this problem, and that is to reduce this impact.

An ecologically, and indeed socially friendly economy—the only one too, one might add, that can remotely hope to provide the billion or so extra jobs or livelihoods required by the end of the century—would be highly localised and diversified, it would use largely local resources and would cater for a largely local or regional market while production would be work rather than capital intensive. It is only in this way that infrastructure and transport could be minimised as well as pollution and resource depletion. Only such an economy what is more, could conceivably be regarded as sustainable. To maintain the habitability of our planet requires that we waste no time in transforming our economy accordingly. But this would require a complete change in our economic priorities and in the world view with which we have been imbued and that serves above all to rationalise and hence legitimise these priorities—and this our society as it is presently organized is incapable of doing.

Free trade moves us in precisely the opposite direction. It is largely for that reason that free trade cannot conceivably be reconciled with environment protection. Let us briefly review some of the empirical evidence for this statement.

In the last fifty years it has been the overt policy of western governments—in particular that of the USA—to force Third World countries into the orbit of the world trading system—which means above all opening up their markets to western goods and encouraging them to gear their production towards the export trade.

It was to achieve this goal that it was decided at Bretton Woods in 1944 to set up the World Bank and the IMF and four years later the GATT—known as the Bretton Woods institutions and that have been ever since the main instruments for the implementation of Bretton Woods policies.

The result—some say the inevitable result—of lending enormous sums of money to Third World governments—a process spearheaded by the World Bank—for ecologically destructive and on the whole economically non viable schemes, was the Third World debt. The IMF, to enable debtor countries to pay interests on loans provided by the West’s beleaguered private banking system, but above all in order to fulfil its brief, that of forcing Third World countries into the global economy, imposed, in particular from the late 70’s onwards, drastic conditions on debtor countries. If they required further loans they had to reopen their markets to foreign investments, foreign imports, cut down on social welfare and education, seen to constitute costs or distortions, and gear their economies to the export trade. A large number of Third World countries agreed to do this. As a result, most of the regulations that will be imposed by the new World Trade Organisation on the basis of the GATT Uruguay Rounds agreements, if they are ratified, which would now institutionalise free trade worldwide, have already been imposed on most Third World countries by the IMF. What have been the consequences for this is an important question, since it will give us a good idea of what are likely to be the environmental consequences of the implementation of the GATT Uruguay Rounds agreement.

In the case of Chile, one of South America’s economic success stories, exports doubled between 1983 and 1989, but the environmental cost, according to Philippine economist Walden Bello, was stupendous. In a government report cited by the New York Times, it is admitted that “the economic growth of Chile has taken place at the expense of the environment The so called export boom was based on the use and misuse of resources, permitting the degradation of the ecosystems greater than their ability to regenerate. (page 59) Vast areas of natural forests were replaced by pine monocultures to provide as rapidly as possible cheap timber for export. Chile’s fishing industry also expanded well above sustainable levels, so much so that the country’s fish catch declined by 16% in 1989 and another 22% in 1990 (page 58).

Costa Rica—another economic success story was subjected to no fewer than 9 IMF and World Bank structural adjustment programmes between 1980 and 1989. Greatly increased exports were made possible by the massive expansion of the banana industry and of cattle raising. The latter was heavily subsidised—a form of governmental intervention which free traders don’t seem to disapprove of—a third of state agricultural credit going to the cattle ranchers. Expansion took place at the cost of the country’s forest cover which dropped from 50% in 1970 to 37% in 1987 and has dropped still further since. Banana production has been particularly destructive to the environment. Huge amounts of chemical fertilisers and pesticides have been used, which are washed into the rivers and end up in the sea—leading among other things to the destruction of coral reefs—90% of them having been annihilated in some areas.

Walden Bello shows that structural adjustment programmes have led to the same sort of environmental destruction in Ghana, the one country in Africa which the World Bank holds out as its main success story, and also the Philippines -one of the most structurally adjusted countries in the world. The forests, soils and coral reefs of the Philippines have suffered terribly in the last 20 years, as have its mangroves, which have been systematically converted into prawn farms geared to the export trade, their extent having been reduced from the original 500,000 thousand hectares to a mere 30,000.

Free Trade or Export Processing Zones

Another experience we have had of the environmental effects of free trade which will also help us predict the environmental consequences of implementing the GATT treaty has been with the so called free trade zones or export processing zones of which there are now about 200 in different Third World countries. In these areas, trade is as free as it can possibly be. Labour laws, and environmental controls are reduced to a minimum or simply not implemented, while every sort of subsidy direct or indirect is offered to attract industrial enterprises which might otherwise be attracted to a free trade zone elsewhere.

The most famous of these zones is in northern Mexico, adjoining the US border, where some 2,100 US corporations have opened up factories, employing some 500,000 people.

The environmental consequences have been atrocious. Highly toxic chemicals have literally been dumped all over the place, polluting rivers, groundwaters and soils and causing severe health problems among workers, and deformities among children of women who have worked in the factories. The American Medical Association has referred to the area as a “sewer”. Horror stories abound. For instance in March 1993, 27 families from Brownsville Texas, filed a lawsuit against 88 different maquilas, claiming the mothers of children with spina bifida and Anencephaly had inhaled while pregnant a cocktail of solvents, acids and heavy metals, blown over the river by prevailing winds. Among the accused are companies twinned with such international household names as General Motors, Union Carbide, Fisher Price and Zenith Electronics. Maquiladoras import most of their raw materials from the US and are supposed to return waste there for disposal. In fact, according to the EPA, a tiny percentage actually does so. Its Mexican counterpart, Sedesol, estimates that while half of the 2100 Maquiladoras generate hazardous waste, only 307 have obtained official licenses.

For President Clinton, the experience of the Maquiladoras was hardly an advertisement for the North American Free Trade Agreement—NAFTA, which he was so desperate to promote. He got round the problem by pledging an 8 billion dollar US government grant to clean up this devastated area.

But it is not just in the Third World that governments are willing to sacrifice social and environmental standards in order to attract foreign investments. Thus, this year, Arizona, Texas, Utah and New Mexico competed to attract a big chip manufacturer (the INTEL Corporation) New Mexico clinched the deal by agreeing to pay half the salaries for up to six months for workers undergoing training, to provide an investment credit at 3% interest of the value of equipment and machinery, to pass a new law reducing corporate income tax for exporting corporations, and to give INTEL 2 billion dollars in the form of State financed industrial revenue bonds while providing it with the tax free land use of the large area it required for thirty years. The extra advantage of not having to buy the land is that it will not have to pay for the environmental cleanup when it decides to move elsewhere—a significant advantage. Chips production is highly polluting, requiring the massive use of water while generating toxic chemicals much of which will find their way into the area’s waterways, groundwaters and soil, with potentially serious consequences for the health of the local residents, who were apparently never consulted over the deal.

All this is in keeping with government policies in the US and elsewhere. Indeed, recently the US Treasury Undersecretary, David Melford (see Cavanagh, “Trading Freedom” page 4) has gone so far as to say “that the countries that do not make themselves attractive would not get investors’ attention. This is like a girl trying to get a boyfriend. She has to go out, have her hair done up, wear makeup.

A Department of Trade and Industry brochure for prospective foreign investors suggests that the UK as a whole may well be on the way to becoming a free trade zone. It boasts of the fact that labour costs are “significantly below other European countries”, i.e. that our policies have made the British people the poorest in Europe—a truly great achievement. It boasts too of the fact that there is no legal requirement to recognise the Trade Unions and accentuates the government’s commitment to reducing regulatory and administrative burdens on business “No new laws” the brochure states, and we may presume that this includes laws designed to protect our environment, “may be introduced without ascertaining and minimising the cost to business”.

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In a highly competitive economy geared to free trade, however, social and environmental deregulation would be indispensable not just to attract foreign industry but in order to prevent our own industry from moving abroad to countries where labour is cheaper—some cases such as in India and China ten to 30 times cheaper—and also more pliant, and where environmental regulations are even laxer than our own. Indeed one must realise that comparative advantage or what is more relevant absolute advantage, is less and less achieved by the development of new technologies which today can be transferred anywhere in the world at a moment’s notice, nor is it a question of capital availability, since capital can be moved to where it is required in a matter of seconds, simply by pressing the appropriate button on a computer. Increasingly, absolute advantage must largely be achieved by deregulation, i.e. by reducing social and environmental standards and hence by allowing our environment and our society to subsidize our economic activities. Not surprisingly deregulation has been the order of the day for a decade or more in the US and the UK. Thus when George Bush was Vice President, he headed the administration’s “Task Force on Regulatory Relief” which, according to Worlds Public Citizens Congress Watch, was involved in “thwarting workers” safety regulations; obstructing consumer products safety controls; rolling back highway safety initiatives and weakening environmental protection”. During the Bush administration this work was taken over by Vice President Quayle’s “Council on Competitiveness” created in 1989, which “worked to stall and block health and safety rules, advance deregulation, and pressure Federal Agencies to pull back from strong enforcement of existing regulations”. Among other things it was active for opening up commercial exploitation possibly as much as half of the United State’s remaining wetlands and tabled more than a hundred amendments to the EPA’s implementation proposals for the 1990 Clean Air Act. In addition it sought to remove health and environmental controls on genetic engineering.

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Deregulation in the UK

In the UK deregulatory processes were set in motion in 1993 by Michael Heseltine, President of the Board of Trade. Different sectoral task forces were set up on the advice of Lord Sainsbury.

In January 1994 the Board of Trade published its “Deregulation Task Force’s proposals for reform”. Of the 605 deregulation recommendations made, some 130 were under the auspices of the Minister of the Environment. These included recommendations that the health and safety executive should assess regulations and requirements purely on the basis of professional business based costs and benefits, minimising the application of what is effect the precautionary principle. They included recommendations that “the creation of any new restrictive EC directives on genetically modified organisms should be opposed” and another that even “information” on the registration of genetically modified organisms” should be restricted in order to protect intellectual property, patent rights and commercial confidentiality. Clearly the environment and public health cannot be allowed to interfere with short-term business expediency. Nor can the imperative of preventing climatic destabilisation since another recommendation is to obstruct any plans to introduce regulations to conserve fuel and reduce C02 emissions.

More effective than deregulation carried out by national governments within their own economy is that which is conveniently imposed by their trading partners under the GATT treaties.

Today the European Union plans to overturn a large number of Californian and US environmental laws which it feels it can successfully as GATT illegal trade barriers, (see the report on Unites States barriers to trade and investment, European Union April 1994). These include, in the first category the Safe Drinking Water and Toxic Enforcement act (proposition 65) which requires warning labels on products containing known carcinogenic substances.

Also targeted is the State of California’s glass recycling law, which requires a proportion of recycled material in imported as well as domestic glass in food and beverage containers.

Among the Federal laws targeted are the “Gas Guzzler” and other taxes which aim at encouraging the production of small, more cost-fuel efficient cars, which is of course essential if we are to reduce pollution levels in cities and more important still if we are to cut down on greenhouse gas emissions.

Another Federal law which the European Union hopes to overturn is the Nuclear Non Proliferation act, a number of laws designed to protect fish stocks by limiting the use of large scale drift nets, and other devices that lead to the over exploitation of fish.

It has been estimated by the US chief negotiator at the UNCED prep-coms [preparatory meetings] that 85% of America’s environmental legislation could be challenged in this way and most of it declared illegal before GATT/WTO panels.

At the same time, the US and other countries can conveniently challenge European Union environmental laws in the same way, as indeed they are doing and will increasingly do, undoubtedly with similar results.

To conclude, another US Federal environmental law that the Union seeks to declare GATT/illegal is the Marine Mammal Protection Act (MMPA) which limit the number of dolphins that can be killed when fishing for tuna in a country that exports tuna to the US. This is an interesting case as Mexico successfully challenged this act before a GATT panel depend on a favourable and stable environment for our welfare and indeed for our survival. It is by far and away the greatest wealth we have. Let us also not forget that our economy is equally dependent on it. There is no economy on a dead planet and we are killing it fast.


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