Introduction
Trade has both positive and negative impacts on the environment. A report by the International Energy Agency (IEA) (2021) revealed that the amount of carbon dioxide released into the atmosphere as a result of trade amounted to around 30-40%, which is a shocking number. However, it has also been established that the proceeds from trade can be used to curb the advanced environmental impacts being experienced globally. The effects of trade on the environment were not always significant but have grown substantially over the years as world economies have continued to develop. Going forward, governments and organizations must learn how to balance trade and environmental sustainability for the overall well-being of human beings and the environment.
The Historical Perspectives of Trade on the Environment
Trade has been around for centuries, evolving from simple batter trade where people exchanged goods for other goods and services to modern systems where people do exchanges without there being any physical flow of goods or services. As trade has continued to evolve over the years, it has had massive impacts on the environment. This aspect was not the case in pre-industrial times, where trade was generally localized and had limited impacts on the environment due to the small-scale nature of its operations (Kaniewski & Marriner, 2020). The earlier means of transportation that facilitated trade, such as the use of the Silk road, resulted in the exchange of goods and knowledge between two different but neighboring regions without impacting the environment in any significant manner. Moreover, during this time, the world’s population was relatively low, and this meant that natural resources were exploited slowly, unlike the massive exploitation that is witnessed in today’s world.
Trade was largely shaped by the Industrial Revolution, and the negative relationship between it and the environment began during this period. The first major boost of the trade, which resulted in massive environmental pollution, was the invention of the steam engine (Zou et al., 2021). This invention enhanced manufacturing and resulted in enormous improvements in transportation networks in the regions where it was first established in North America and Europe. During the Industrial Revolution period, there was massive exploitation of resources, and environmental degradation became a norm as traders began trying to maximize their profits. For instance, Bordoloi (2024) shows that during the Industrial Revolution period, deforestation became rampant as people started to clear land not only for agricultural purposes but also to create land for industries. The Industrial Revolution period was also characterized by people beginning to understand that mining was a major economic activity, as well as dumping their wastes on land, air, and water, which was a cost-effective way of getting rid of their trash.
In terms of trade, today can be defined as the modern era, as it is characterized by large multinational corporations controlling trade and trying to be committed to environmental sustainability through efforts outlined in many of their sustainability reports. The modern era of trade began in the years following the Second World War, which was associated with the economic boom in most parts of the world and led to the establishment of organizations such as the World Trade Organization (WTO) set to control and regulate the unprecedented expansion of global trade. The modern era of trade, which has witnessed massive globalization, can be argued to have both positive and negative impacts. Many countries across the world are now sharing technologies that ensure that innovations are designed in a manner that minimizes the total amount of carbon footprint released by those organizations (Sovacool et al., 2022). Moreover, developments in trade have resulted in economic advancement, which has ultimately resulted in resources becoming more available for investment in the environmental protection industry.
However, despite the positives witnessed in the modern era, trade, as it is known today, has had massive negative environmental impacts. First, people have become over-reliant on the resources produced by traders, such that the global demand for goods exceeds the current global supply. This aspect has made organizations go overboard in their quest to maximize their profits, making them use these resources in a manner that exceeds the sustainable limits. Moreover, almost all organizations rely on some form of energy sources, such as petroleum and coal, leading to environmental degradation (see Figure 1) (An et al., 2021). One such case is deforestation, where the demand for housing units has increased in a substantial manner, making people cut excessive trees down in their quest to ensure that there is enough timber for the construction processes.
Another area where there has been massive exploitation as a result of trade is the fishing industry. Many fishermen now use environmentally unfriendly means to ensure they catch substantial amounts of fish for their trade activities (Moreau & Garaway, 2021; Song et al., 2020). Marine overfishing for trade purposes has resulted in the exploitation and overexploitation of fish over the years, as shown in Figure 2 below. The aforementioned mining has also had a great negative impact on modern trade and the environment, as it has resulted in a great loss of biodiversity and increased ecosystem biodegradation.
Understanding these historical perspectives is important for scholars, policymakers, and other key stakeholders when addressing the problem and solving the contemporary challenges of environmental degradation. Since understanding the problem is the first step to solving it, the relevant key players must acknowledge that trade has both positive and negative impacts on the environment (Goulet-Lyle et al., 2020). Then, they should formulate ways of ensuring that these problems are well addressed to ensure a safer planet for future generations.
The Positive Impacts of Trade on the Environment
As briefly mentioned in the previous section, trade has many positive impacts on the environment, and the stakeholders can structure trade to optimize these benefits. This restructuring can be in the form of technological transfer, having countries across the globe committed to economic growth and environmental investment, or ensuring international co-operation, among other things. In this section of the paper, the positive impacts of trade on the environment are addressed, showing that trade can lead to better environmental outcomes.
Technological Transfer
One of the biggest benefits of trade, particularly international trade, is technological transfer. This means that countries that have discovered technologies that facilitate the exchange of goods and services while ensuring minimal emissions of gases and pollution of the soil can transfer the technologies to the countries still relying on traditional methods (Ferreira et al., 2020). Some of the technologies that have been moved in the past as a result of trade and resulting in environmental conservation have included renewable energy systems, pollution control equipment, and sustainable agricultural practices. Today, countries hold regular annual meetings to address the issue of climatic change and environmentally sustainable production methods, and countries with better technologies to achieve the objective are often encouraged to act as role models for others.
This technological transfer has, in the past, been witnessed in renewable energy systems, where developed countries have led to the development of technologies such as solar systems, turbines that use wind, and energy-efficient machines that are now heavily used in developing nations. These technologies not only help developing countries to achieve reduced carbon footprint in the environment but also ensure that the globe as a whole transitions to sustainable, green energy sources. A case study of this form of exchange has been witnessed in India, which has imported massive solar panel capacities from developed countries such as China and Germany (Behuria, 2020). The transfer has made India, which has a population of above 1 billion people, significantly reduce the carbon produced by the country into the atmosphere. As technology transfer facilitated by trade continues to become a critical aspect of environmental conservation, it should continue being advocated for and implemented by various nations and multinational organizations.
Economic Growth and Environmental Investment
Sustainability, despite being loved by many environmental enthusiasts, can be hard to achieve because it requires substantial capital to initialize. Therefore, trade plays a pivotal role in ensuring that the environment is well taken care of by ensuring that nations have the capital that they require to initiate the necessary measures for ensuring that organizations and countries use environmentally friendly practices. Studies have proved that countries that are deeply involved in trade have more time to invest in sustainable environmental measures in comparison to their underdeveloped partners (An et al., 2021). A great example of this case is South Korea, whose economic boom, primarily driven by trade, ensured that the country had a chance to invest in green technologies and sustainable infrastructure (Kim, 2023). The country’s top management used the revenues that the country generated from the trade activities to ensure that the factories in the country prioritized air quality and were keen to ensure sustainable waste management by its organizations. The Asian nation also leveraged the proceeds gained from trade activities within the country to ensure the adaptation of renewable energy sources and also encouraged other nations across the border to do so through various trade agreements.
Today, individuals are well aware of the importance of sustainability and seek to buy from organizations that are committed to sustainability goals and objectives. Organizations have realized the motivations of their customers and are now very committed to ensuring that their clients understand that these organizations use environmentally friendly practices. For instance, all big organizations today release annual sustainability reports in addition to financial statements that show the organization’s advancements in protecting people and the planet (Izzo et al., 2020). Having good measures and objectives for environmental conservation serves as a way for the organization to advertise itself as committed to sustainability and can result in increased sales. Moreover, international trade bodies such as the EU have implemented strict environmental conservation policies, which has resulted in other nations also doing the same in an effort to gain access to this large market.
International Co-Operation
Today’s world has seen increased volumes of international trade, and the co-operation among the nations has made it easier for common laws to be established on how trade, both in production and distribution, can be handled in an environmentally friendly manner. Indeed, many of the trade agreements being established today are committed to achieving pre-set environmental standards. These types of engagements can and have resulted in improved ecological practices among various nations as well as strengthening governance and oversight into how organizations are producing their multiple goods and services. An example of trade co-operation that encourages environmental conservation is The North American Free Trade Agreement (NAFTA), which has now changed to the United States-Mexico-Canada Agreement (USMCA) and ensures that air, land and water are ensured in the continent (Laurens et al., 2022). The agreements between the three member states have ensured that cross-border initiatives are focused on instilling environmental practices into trade agreements.
In sum, there are various benefits that trade, both local and traditional, can have and has had on international trade. The exchange of goods and services for other goods or money has made the environment well taken care of through technological transfer, enabling countries, especially developing nations, to have access to international technologies that are environmentally friendly. Trade has also resulted in the establishment of co-operations that hold member states liable for their practices.
Negative Impacts of Trade in the Environment
Resource Depletion
Despite the many positive impacts of trade on the environment discussed above, trade has various negative effects on the environment. One of the key negative factors of trade is environmental degradation and depletion of natural resources (Huang & Zhao, 2022). To meet the increased needs in the international and the local markets and increase profitability for their owners’ organizations usually focus on improving their production. This facet results in the natural resources becoming over-exploited, thus leading to a loss of biodiversity and ecosystems. A great example of areas where trade has significantly impacted the environment is the Amazon rainforest. This region, which is known for having extensive species of animals and trees, has, in the past decades, witnessed vast tracts of forests being cleared to create ways for farming, agriculture, and raw materials for various economic activities. The clearing of the Amazon has and is expected to bring catastrophic impacts, such as a climatic change, in the coming years. Trade also led to the depletion of some types of natural resources, such as fishing, as a result of overfishing.
Pollution
Trade negatively impacts the environment through pollution as many industries, especially those in unregulated regions, dump their waste into rivers or the air in an effort to reduce their costs of production. One major concern that many environmental specialists have had in the past decade is air pollution, where it has been established that excessive emission of greenhouse gases can result in global warming and climatic change. Air pollution is also associated with other negative impacts, such as respiratory problems among people and acid rain, which can have negative health impacts on people and the environment, as well as other negative effects on people, animals, and plants. China is an example of a country where trade activities have directly resulted in the country experiencing global warming, which has affected the health of millions of people in the country (Abbass et al., 2022). Another country significantly affected by pollution as a result of trade is Bangladesh, where water pollution as a result of the textile industry has severely impacted the local ecosystems and citizens in the country (Saha et al., 2023). The impacts are not just in China and Bangladesh but are being experienced in almost all countries across the globe in varying degrees.
Policy Recommendations
To address the negative impacts of trade on the environment, the following measures need to be taken. First, stricter environmental regulations must be implemented to ensure that countries and companies cooperate with practices that ensure chemical safety and reduce environmental impact. Second, sustainable supply chain practices need to be promoted, ensuring ethical sourcing, reducing waste during the supply processes, and minimizing energy consumption. Third, organizations must be given incentives such as tax cuts, grants, and subsidiaries if they invest in environmentally friendly forms of trade. International bodies also have a role to play in ensuring that trade and environmental sustainability are aligned and thus should seek to create mutually inclusive agreements among nations, ensuring their co-operation towards the sustainability goals. Finally, organizations must be encouraged to uphold corporate responsibility, invest in environmentally friendly technologies, and create sustainable transportation solutions.
Conclusion
Balancing trade with environmental sustainability is a critical factor that nations and organizations must focus on going forward. Literature substantially reveals that trade has both negative and positive impacts on the environment. Thus, to balance the effects of trade on the environment, a multi-faceted approach must be taken, and organizational goals must be made to align with the environmental objectives. The goal can be achieved by setting strict regulations for countries and companies concerning environmental pollution, promoting a sustainable supply chain, having incentives such as tax cuts, grants, and subsidiaries, strengthening international bodies, and upholding corporate responsibility. Moreover, scholars and researchers have a role in ensuring that they bring a clear understanding to the decision-makers as to how exactly trades impact the environment and the best measures that can be taken.
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