Toxic releases by manufacturing : world patterns and trade policies

Little evidence exists on the distribution across countries of toxic releases by manufacturing, or on how those patterns change through time. A number of studies have asked whether environmental controls imposed in the industrialized economies are diverting investments in pollution-intensive activities offshore. These studies reach a broad negative conclusion: direct investment does not appear to be stimulated by such regulation, in part because the cost of emission controls is generally a tiny fraction of operating costs. But direct investment reflects only part of what may be happening to world production patterns. Technology transfers may occur with no simultaneous direct investment, and production may readily shift toward a different global distribution without either direct investment or technology transfer. The author presents the evidence on the world distribution of manufacturing production according to pollution density - using data from the World Bank Industrial Pollution Projections Team. He then examines the validity of the claim that free trade would result in greater and more rapid environmental degradation for developing countries. He finds that: (1) The onus is on the higher-income countries to contain the emissions of their increasingly pollution-oriented mix of manufacturing industries. (2) The global trend has been toward an increasingly emission-intensive pattern of production, in relation to both manufacturing and to GDP. This trend has been remarkably constant over three decades and shows no signs of slowing. (3) The upward trend in emission-intensity of manufacturing production has been faster among lower-income nations. If pollution restraints on given industies are progressing more rapidly among the wealthier countries, this disparity would be even sharper than the Bank data suggest. Developing countries that produce coal, crude oil, or natural gas also have more pollution-intensive manufacturing sectors, based on the availability of those raw materials. It may be doubted that fostering such industries always reflects a comparative advantage. Petrochemical industries in the coal-oil-gas-producing countries are often substantially protected or subsidized. Among all developing countries, import protection stimulates a larger chemicals industry and thus more emission-intensive manufacturing. One might guess that less protection of local industrial chemical industries would decrease the pollution-intensity of the developing countries'industry. But merely relocating firms that emit globally damaging toxins clearly misses the point.