Environmental Contamination and World Trade Integration: The Case of the Czech Republic

By Madeo, David E. | Law and Policy in International Business, Spring 1995 | Go to article overview

Environmental Contamination and World Trade Integration: The Case of the Czech Republic


Madeo, David E., Law and Policy in International Business


The recognition of global environmental threats has significantly impacted trade relations between nations. This trend is particularly evident in the struggle of less developed or modernizing countries to achieve full membership in the international trade community. As these nations search for an appropriate response to environmental contamination, they must consider the effect of regulatory action on trade and economic growth. The problem is particularly acute in the formerly communist countries of East Central Europe, which have suffered severe environmental degradation and are struggling both to transform their economic and political structures and to integrate with the world trading system.

The dramatic political transitions in East Central Europe since 1989 have profoundly affected the outlook of the international. trade community. The formerly communist countries have attempted to pursue two primary objectives: transformation of their economics from centrally planned to market-oriented and integration into the international trade community. While these nations face an array of obstacles to the achievement of these objectives, the deplorable environmental conditions in East Central Europe may well be the most difficult problem to overcome. Although residents of the region have a significant interest in cleaning up the environment, the implementation of environmental regulations hinders domestic economies at a time when they are extremely vulnerable. The possible repercussions will affect the position that East Central Europe will occupy in Europe and the international trade community.

This Note discusses the problems that arise when a country devastated by past environmental policies attempts to gain admission into the world trading system and thereby reap the benefits of less restricted trade. It focuses on the Czech Republic as a nation that is particularly well situated to capture the benefits of increased trade and integration yet also faces enormous environmental problems. The Czech Republic possesses a level of social and economic development that is beyond that of a typical developing nation. At the same time, however, it must recover from forty years of socialist policies to join the modern world trading system. This Note will examine the impact that Czech environmental problems and remedial legislation are likely to have on the Republic's attempt to integrate into the international trading system. While the regulations have imposed higher costs on Czech production, they eventually will lead to increased trade with the international community, particularly the European Union.

Part I examines the interrelationship between trade and the environment. In Part II, this Note discusses why the Czech Republic is advantageously positioned to transform its economic system and to benefit from increased international trade. Parts III and IV illustrate the severe environmental problems of the Czech Republic and recent attempts to remedy them through environmental reform. Part V details the effect that environmental issues will have on Czech trade with respect to the GATT and the European Union.

This Note concludes that the success of a market-oriented Czech state depends on free trade and access to other markets. The West either can support the Czechs and the international economy through open trade and environmental assistance, or it can close its markets with trade barriers ostensibly designed to protect its industry from "unfair" competition.

I. THE INTERRELATIONSHIP BETWEEN TRADE AND THE ENVIRONMENT

The condition of a nation's environment and national environmental regulation often significantly affects trade relationships. The primary issues concern the related concepts of price competitiveness and industrial location. The imposition of environmental regulations places environmental control costs on producers, which erode their price advantage relative to foreign competitors. …

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