Enlisting the support of liberal trade for environmental protection and sustainable development.

• Author: Eglin, Richard
• Position: Trade and the Environment

The decision to enlist the support of liberal trade for environmental protection and sustainable development has already been taken, at the, regional level for example in the North American Free Trade Agreement (NAFTA), and on a global scale in the United Nations Conference on Environment and Development (UNCED). The myth that trade and the environment are on a collision course has been thoroughly debunked, and the direction of policy change deems in no doubt. Clever governments are not looking for a trade-off between the two, but for the means of capitalizing on the broad popular and political support that both enjoy. They now need to settle on how best to design and implement mutually supportive policies.

Proper environmental protection depends on government intervention. Free market forces alone will not do the job as long as so many key environmental resources remain unpriced or underpriced in relation to the value that society attaches to them.

That does not amount to a rejection of market forces, and still less to the conclusion that modern, growing market economies are incapable of taking care of their environments. On the contrary. The extent of environmental decay in Eastern Europe, after forty years of neglect, has destroyed whatever faith there may have been in total reliance on state intervention. Closer to home, the environmental damage that Organization on Economic Co-operation and Development (OECD) countries inflict on themselves through agricultural protectionism, at an annual cost of more than $300 billion, makes the point as clearly as anything: bad economic policies lead invariably to miserable environmental consequences.

With proper pricing policies in place, vigorous competition and undistorted markets have a key role to play. They encourage innovation, technological progress and productivity gains that will be crucial if the challenge of sustainable development is to be met, and they deliver the greatest possible increase in the quality of the environment at least cost by allocating resources, especially environmental resources, as efficiently as possible. The more efficiently governments set about environmental improvement, the more demand there win be for it.

Government intervention is not anathema to the General Agreement on Tariffs and Trade (GATT). The GATT is not about free trade at any cost, nor is it a policy-maker's straight-jacket. A wide range of trade-related measures, whether of the market-based or the...