India Markets open in 8 hrs 12 mins

India must not compromise on environmental quality in global trade

investment in india, indian markets, indian economy, NPAs, investment policy in india, FPI, FPI investment, stock market, FPI inflows, stocks, FPIs in equity, global warming, climate change, Green technology, air pollution, food systems, weather events, india, India US trade, WTO, international trade, india import duties, international trade india

By Vidya Hattangadi

Environmental issues have been increasingly disturbed because of global business practices, as also due to social issues and problems in handling waste. Environmental concerns are weakening developing countries and they cannot be ignored any more. Several examples show direct connection between growth and environmental degradation: China logged over 75 million hectares of forests in the last decades of the past century. Expectedly, in 1997, severe drought caused by the drying of the Yellow River affected people and industries in northern China. The following year, flash floods in the Yangtze River caused damages worth $30 billion. The Chinese government concluded that deforestation was behind these events, and it has banned logging.

Some nations prohibit import of goods that cause ecological damage. For example, the US has banned the import of shrimp harvested without the 'turtle excluder device', because of its concern for endangered sea turtles. In 1994, the WTO intervened to address concerns regarding the import of shrimps and its impact on turtles-known as the Shrimp and Turtle case. The ruling was adopted on November 6, 1998. However, Malaysia persisted in their complaint and initiated DSU Article 21.5 proceedings against the US in 2001, but the US prevailed in those hearings.

Developing countries are affected by the relocation of polluting industries from developed areas. Also, many products that are banned in developed nations are marketed in the underdeveloped world. Environmental integrity is crucial for a developing nation such as India and must be guarded under all circumstances. In the last couple of years, acute water shortage has forced some companies to shut down. Incidences of droughts and floods have also caused incalculable financial losses. Over 2,000 Himalayan glaciers have reportedly melted in the past few decades, causing floods and climatic changes.

The dumping of nuclear and hazardous waste in developing countries and the shifting of polluting industries to developing countries impose heavy social costs. In August 2006, cargo ship Probo Koala discharged 500 tonnes of toxic waste in Abidjan, West Africa, killing 17 people and poisoning thousands. In 1988, thousands of barrels of hazardous waste disguised as building material was discovered in the village of Koko in Nigeria. Several barrels were unsealed, causing leakage and serious health effects to residents. Exploitation of natural resources of developing countries to satisfy global demand causes ecological problems. African nations have long been at the centre of such incidents.

When MNCs exploit underdeveloped countries by using polluting technologies, they must be severely punished. When we don't care for the environment, it destroys the mankind and living beings unbelievably. Environmental CSR aims to reduce damaging effects of business processes. CSR activities focus on energy use, water use, waste management, recycling, emissions, etc. At times, developed nations raise environmental issues as a trade barrier rather than for genuine reasons.

The debate has intensified in recent years on the connection between trade and environment, and the role the WTO can play is important in promoting environmental-friendly trade. Those who have raised a roar of environment issues at the WTO have a valid reason because of circumstances where trade and the pursuit of trade liberalisation have had harmful environmental effects. Also, trade can negatively impact environment when property rights in environmental resources are ill-defined or prices do not reflect scarcity.

When the ordinance of NAFTA expansion to Peru was passed in 2007, alert citizens and environmental groups warned that the Peru FTA would incentivise a massive sell-off of the sensitive Peruvian Amazon rainforest to oil & gas companies. Such situations result in the abuse of scarce environmental resources and degradation, which worsens through trade. Some of the pollution can be purely local, such as polluting waterbodies because of chemical waste from local factories, or noise pollution due to factories, etc. Other pollution can have global repercussions; for example, excessive emission of greenhouse gases, destruction of rainforests, and so on.
Another fact to consider here is if some countries have low environmental standards, big businesses are likely to shift production of environment-intensive or highly-polluting products to the so-called pollution havens. Worse, trade-induced competitive pressure forces countries to lower their environmental and health standards. Women working in Cambodian factories supplying some of the world's best-known sportswear brands are suffering from repeated mass fainting due to excess heat and pathetic working conditions. Factory owners have not properly invested in safety of work environment and are paying very low wages to the workers. Also, short-term contracts are a root cause of job insecurity; workers cannot refuse overtime, because they are insecure about their contract renewal.

A positive point to note in international trade is that some nations have extremely high quantities of raw materials, which they are unable to use domestically. For example, Australia has the most iron ore reserves in the world, at 35 billion metric tonnes. Venezuela has the largest oil reserves, with 297.6 billion barrels. With freer trade, Australia sells easily its excess iron ore and Venezuela sells oil to other nations, and takes advantage of their material surplus to benefit their economy. Organisations like Unilever, IKEA, IBM and Adobe have the most comprehensive CSR programmes.

(The author is a management thinker and blogger. Views are personal.)