Focus on Environment Trade

The expansion of global trade along with the rise in the global value chain often raises the question of how trade and the environment interact with each other. Thus this article deals with the topics like “focus on environment trade” and “How did environmental factors impact trade routes” with respect to the trade and the environment. The physical impact of the climatic change has a direct and indirect impact on the trade environment. The direct impact of the environment on trade is with respect to trade and the environment encompasses the effects of climate change on trade-relevant supply, transport and distribution chains. These factors became the major reason for the damage to the trade infrastructure like ports that are affected by the rise in the seawater level due to frequent weather events. The positive effect could be the opening of the new water trade route in the arctic due to the retreat of polar ice under warmer temperatures. 

The indirect impact of the environment on the trade will be subjected to the impact on the production of goods and services. This in turn directly affects the trade economy. The impact of climate change on the production of goods and services is because of the impact that is faced by the factors of production of economies, i.e.land, labour, and capital. The comparative advantage of economics is altered due to the direct and the indirect change of the climatic change and hence the trade flow and pattern also differs with it. 

Focus on Environment Trade

As the environment has a direct or indirect effect on the trade, similarly trade too has both positive and negative effects on the environment. The trade expansion is a result of the economic growth that severely affects the environment by increasing the degradation of natural resources and pollution at the same time. In addition to this, more the liberalization, the more will be the rise in pollution-intensive activities. It is because the policies that focus on environmental trade are different for different countries and thus the so-called pollution haven hypothesis also differs. 

Economic growth, development, and social welfare supported by the increase in trade can, in turn, contribute to a larger capacity in managing the environment more efficiently. Moreover, the open markets due to globalization have given access to new technologies to the world market that increases the effectiveness of the production by decreasing the use of inputs such as environmentally harmful chemicals and substances, water, land and other resources. 

The trade liberalization and the investments sufficiently supply the incentives that can be in turn, directed in creating strict environmental policies as well as standards. The export sector becomes more exposed to environmental requirements imposed by the leading importers with the rise in the integration of a country into the world economy. Thus the huge changes that are needed to be met as per the standards, in turn, flow backwards in the supply chain and the demand for the use of more cleaner products and developed technologies are used to create more competitive products for the world’s market. 

Few of the consequences that arise from climatic or environmental alteration can result in the disruption of the trade. Direct consequences on the trade can arise from the climatic changes such as frequent rise and fall in the sweater level that impacts the ports from where much of the trading takes place. Supply chains and infrastructures like transportation and distribution are likely to be vulnerable to disruption due to climatic changes. Due to extreme events, the majority of the ports face temporary or permanent closure and the trading of the world gets affected as 80%of the trading is supported by the maritime framework. Moreover, the climatic condition in its extreme phase directly affects all kinds of production and production factors like labour, capital, land etc. This ultimately results in output losses and a decrease in the volume of global trade.  

How did Environmental Factors Impact Trade Routes?

The following table elaborates more clearly the impacts and consequences on trade infrastructures by environmental factors:

The expansion of global trade along with the rise in the global value chain often raises the question of how trade and the environment interact with each other. Thus this article deals with the topics like “focus on environment trade” and “How did environmental factors impact trade routes” with respect to the trade and the environment. The direct impact of the environment on trade is in with respect to trade and the environment encompass the effects of climate change on trade-relevant supply, transport and distribution chains. These factors became the major reason for the damage to the trade infrastructure like ports that are affected by the rise in the seawater level due to frequent weather events. The positive effect could be the opening of the new water trade route in the arctic due to the retreat of polar ice under warmer temperatures. The indirect impact of the environment on the trade will be subject to the impact on the production of goods and services. This in turn directly affects the trade economy. The impact of climate change on the production of goods and services through changes to the factors of production of economies, i.e.land, labour, and capital.