Magazine article Foreign Policy in Focus

Problems with Current U.S. Policy

Magazine article Foreign Policy in Focus

Problems with Current U.S. Policy

Article excerpt

Current U.S. policy rests squarely on neoliberalism--dismantling national barriers to international trade and investment and creating global commercial disciplines while leaving the social and environmental regulation of markets to nations.

U.S. foreign policymakers, however, are not wholly insensitive to environmental concerns. The Office of the U.S. Trade Representative has a section devoted to natural resources and the environment. At the World Trade Organization, the U.S. has been viewed as a leading environmental proponent--at least when it suits U.S. commercial interests. In keeping with its overarching commitments to neoliberalism, U.S. investment/ trade-environment policy has two tenets: 1) liberalization is, on average, good for the environment; and 2) the best way to increase MNC global environmental performance is through voluntary corporate self-regulation.

What is the evidence that these tenets are valid? In a recent literature review, the OECD found that FDI generates both positive and negative environmental impacts at the micro (that is, plant or locale) level. However, the OECD identified a significant research gap on the ecosystem-wide scale or macro effects of FDI, especially of FDI-induced increases in income. Free-marketeers have made much of two studies by economists Gene Grossman and Alan Krueger showing that environmental quality rises with income, once per capita income reaches about $5,000-8,000. Richer consumers, for example, are able to buy better cars, reducing air pollution.

These studies, however, utilize narrow indicators of local environmental performance, e.g., measures of urban air and river pollution in Mexico. They ignore a range of other environmental impacts that have been shown to increase with affluence, including bioaccumulating toxic and hazardous wastes, the loss of biodiversity/habitat, and atmospheric pollution. Raising incomes in developing countries should be a central goal of global investment rules, but it will not, of itself, put economic development on an ecologically sustainable footing.

Moreover, foreign firms apparently do not consistently perform better in developing countriest. In some sectors, notably energy, foreign firms are likely to have superior technology or close links to "green consumer" markets. Both foreign and domestic firms seem to be incrementally improving their environmental performance in many parts of the world, primarily due to national regulation and/or local community pressure. In the main, foreign links, including export markets and plant ownership, seem to make little difference to firm performance. Though FDI may offer benefits in particular sectors in particular countries--for example, cleaner energy technologies in China--there is no discernible, broad "pollution halo."

There is some evidence that green consumers in Europe and North America are using ecolabels to positive effect, especially concerning sensitive resource-based products like timber and bananas. The improvements, however, have been incremental. The "Eco OK" label, for Costa Rican banannas allows European consumers to reward producers who reduce agrichemical inputs and improve worker health and safety. However, it does not stem--and may even promote--the widespread ecological damage caused by monocultural banana production. …

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