Trade and the Environment in the Perspective of the EU Enlargement – DG Env – Trade
Within this project financed by the European Commission, FEEM will organise a two-days workshop under the title "Trade and the Environment in the Perspective of the EU Enlargement". This workshop is aimed at stimulating the debate on the use of economic instruments in implementing environmental and trade policies in the EU and in Central Eastern European Countries (hereinafter CEECs), with a particular focus on their future accession. The workshop is intended to gather together academics, researchers, practitioners and policy makers working both in the environmental and trade fields.
Within this project FEEM will organise and host a two-days workshop under the title "Trade and the Environment in the Perspective of the EU Enlargement". This workshop is aimed at stimulating the debate on the use of economic instruments in implementing environmental and trade policies in the EU and in Central Eastern European Countries (hereinafter CEECs), with a particular focus on their future accession.
The workshop is intended to gather together academics, researchers, practitioners and policy makers working both in the environmental and trade fields.
The first part of the workshop will be devoted to analyse the impacts of trade taking into consideration different characteristics of the environmental goods and bads involved (renewable and non-renewable resources, on the one side, flow and stock polluting emissions, on the other side) as well as the main determinants and patterns of trade (considering the different degrees of competitiveness of markets and industries, the increasing role of eco-industries, the role of eco-labelling, etc.).
The second part of the workshop will address the issue of the effects of the environmental policy on trade flows and patterns. The vast literature on environmental policy has identified two main approaches: the command-and-control approach which includes standards and quotas and the market-based approach, e. g. economic instruments such as emission permits, incentives and taxes. A specific session will deal with the effectiveness of measures taken in the framework of climate change, such as the implementation of flexible mechanisms (Joint implementation, in particular) introduced by the Kyoto Protocol as these affect foreign direct investments flows and patterns and subsequently technology transfer within the enlarged EU.
A round table will be organised as a final part of the workshop, where policy makers of European and international organisations and representatives of the business sector, as well as from consumer and environmental associations and NGOs will highlight some conclusive remarks. The workshop is to be held in Milano in May 2001.
Literature shows that trade liberalisation and globalisation have enhanced economic growth in industrialised countries and in some developing countries, although in some cases this has been achieved at the expenses of the environment. Moreover, economic instruments often constituting protectionist barriers to trade have been reduced dramatically in the course of these last few decades, whereas the use of these instruments is currently questioned and debated in the environmental policy field. These considerations led inevitably to the need of fostering the compatibility of trade and environment policies. This need becomes even more crucial in view of the accession of some CEECs to the European Union, as trade and foreign direct investments (hereinafter trade) are expected to increase, thereby determining an impact on the overall sustainability of production and consumption patterns in the enlarged European Union. Moreover, pre-accession countries are not only required to cope with competitive pressure and market forces within the Union, but also to adopt , implement and enforce the "acquis communautaire" both in the environmental and trade fields ("The Copenhagen criteria", Copenhagen European Council, 1993). The recent literature on trade liberalisation and environmental quality has highlighted three main effects of trade on the environment. The scale effect implies that trade may worsen the environment in both CEECs and in the EU by increasing the scale of economic activity, although this could lead to some forms of cleaner environment because of the improvement in their real income. The composition effect is twofold. On the one hand trade may influence environmental quality by relocating production towards countries with less stringent regulations; on the other hand in an enlarged trade area there is an increased competition among "clean" goods produced in those countries with a more stringent environmental legislation and "dirty" goods produced in those countries with low environmental standards. This implies that part of the demand from countries with strict environmental legislation will shift towards the more competitive consumption goods (not charged with the cost of a "clean" environment) of low-environmental- standard countries. Given these features of the composition effect, trade might worsen the environmental quality in CEECs and improve it in the EU. The technology effect implies that trade may improve the environment in CEECs by increasing the adoption and the diffusion of cleaner technologies. As a result, the overall impact of trade on environment is ambiguous and needs to be analysed in detail. Moreover, a further and possibly strategic role of trade in improving environmental quality has been identified recently by the literature studying environmental agreements and coalition formation. It is well known that the effectiveness of any agreement undertaken to limit global environmental externalities improves when the number of countries involved in the agreement increases. Nevertheless the participation to such an initiative is costly, in particular for those countries with lower development level. In this framework, research suggests that coupling a costly agreement on environmental protection with an advantageous agreement on trade (the so called "issue linkage") can be a winning strategy to attract new countries in the agreement and thus to increase its "green" effectiveness.