Relationship between international trade and environment

relationship between international trade and environment

Summary: This petition examines the relationship between international trade and the environment. The petitioner argued that increased international trade. The link between trade and environmental protection — both the impact of and policies intersect with international trade in a number of different ways. The report Environmental Effects of International Trade considers Figure 1: An inverse relationship between the total trade/GDP ratio and sulphur dioxide.

The Relationship between International Environmental and Trade Agreements

Thank you for taking the time to raise these important issues. In your petition, you suggest that "in order to address the global climate crisis, doesn't Canada need to limit trade, and to encourage local production?

Canada's economy benefits immensely from international trade, with the value of exports representing 45 per cent of our gross domestic product. At the same time, Canada is committed to addressing environmental considerations in the context of trade liberalization. We believe that economic integration, coupled with effective environmental policies and management systems, can have a positive impact on the environment and societies by improving the efficient allocation of resources, promoting economic growth, and increasing general standards of living and welfare.

In short, we believe that trade liberalization and environmental protection can, and should be, mutually supportive.


Mutually supportive policies do not happen automatically. In addition to being based on a solid understanding of the linkages between trade and environment, transparency, consultation, cooperation and coordination both domestically and internationally are required to seek creative solutions to emerging environmental issues resulting from increased trade liberalization. Environmental assessment is a key tool to help improve and ensure the coherence between trade policy and environmental protection.

The Framework is the result of extensive public consultations.

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It is assisting Canadian trade negotiators to integrate environmental considerations into the negotiations of trade agreements. DFAIT is leading this multi-disciplinary exercise in close collaboration with Environment Canada, the Canadian Environmental Assessment Agency and other relevant federal departments and agencies. As a country becomes more integrated with the world economy, its export sector becomes more exposed to environmental requirements imposed by the leading importers.

WTO and the Environment: the Impact of International Trade on the Environment

Changes needed to meet these requirements, in turn, flow backwards along the supply chain, stimulating the use of cleaner production processes and technologies. The early adoption of environmental regulations has been helped in many ways including by the spread of bilateral and regional trade agreements between developed and developing countries which typically provide resources and institutions for information exchange and capacity building, and encourage the less economically developed partner to strengthen its environmental regulations.

For this to occur, the cost of meeting environmental regulations would have to be significant enough to counteract the other factors that determine international competitiveness and that influence investment decisions: Numerous analyses have shown that the cost of avoiding or treating most pollutants adds only a few percentage points to total production costs; in brief, there is little that countries can gain from becoming pollution havens but they would have a lot to lose in the long run if environmental degradation affects their own competitiveness.

Emissions of greenhouse gases GHGs may be the notable exception.

relationship between international trade and environment

The cost of mitigating emissions of carbon dioxide, the most common GHG, can be significant for industries that consume large amounts of fossil fuels or which produce large quantities of GHGs such as agriculture. Moreover, carbon dioxide, unlike carbon monoxide or sulphur dioxide, poses no immediate danger to people or property close to the emitter.

WTO | Trade and environment

Rather, it contributes to the phenomenon of global climate change. Countries that are attempting to impose caps on GHG emissions within their own borders are concerned that industries that are both potentially large emitters of GHGs, and vulnerable to competition through trade, will shift production to countries that are not limiting their GHG emissions - so-called carbon leakage. Analyses suggest that this concern is likely to be valid for only a few heavy industries - notably, metal manufacturing.

Other industries, such as glass-making and cement manufacturing, are to some extent vulnerable, but their products generally have lower unit value than metals, and therefore the need to produce close to final consumers and avoid high transport costs is strong.

Trade and environment - OECD

For the future, a global climate regime could eliminate potential carbon leakage, through emissions limitations in a broader group of countries or specific co-operative approaches on sectoral action in the most carbon intensive sectors.

In this way, governments can help promote a low-carbon economy and provide the first mover advantage to companies first developing low-emitting technologies.

How can environmental interests be achieved? Effective environmental policies and institutional frameworks are needed at the local, national, regional, and international levels.

relationship between international trade and environment

This in turn depends on whether appropriate environmental policies are in place within the country in question. If they are, trade and trade liberalisation benefit the environment because the resulting increase in economic growth stimulates the demand for environmental protection and generates additional income to pay for it.