Are free trade and environmentalism incompatible?

Luke Warren

June 24, 2020

Free trade is often said to be diametrically opposed to the ambitions of environmentalists. Greta Thunberg and Extinction Rebellion often vociferously critique globalisation and capitalism, claiming it to be unsustainable and the root cause for the impending environmental catastrophe.

Free trade and the liberalisation of markets certainly sometimes results in increases in greenhouse gas emissions. Nonetheless their benefits, both for economies and local environmental conservation efforts, have often proven to outweigh the costs.

Free trade has proven to be the best route to growth and prosperity for nations. Since 1950, global GDP has risen from $4,081bn to $86,599bn. World exports increased from $62bn in 1950 to $17,706bn in 2017. Through the immense power of free trade, millions have been lifted out of extreme poverty.

In 1950,1.81bn people out of an entire global population of 2.52bn lived in extreme poverty. In 2015, only 0.7bn out of a population of 7.35bn lived in extreme poverty. Free trade has, and will continue to be, a key driver of sustainable economic growth for the developed and developing world.

Does free trade, though, necessarily mean that there must be a compromise or negligence of environmental ambitions, whether that be reducing greenhouse gas emissions or conserving local environments?

Richer countries boast higher environmental standards than those less economically developed. The Environmental Performance Index (EPI), which quantifies and numerically marks the environmental performance of a state’s policies, demonstrably shows this to be the case. The 2019 EPI recordings highlight that countries with a higher GDP per capita, such as the UK, France and Norway had stronger environmental standards and performances than those with a lower GDP per capita, including the majority of African nations, India and China.

Simon Kuznet’s theory on the relationship between economic development and the environment standards of a nation reflects the markings of the EPI. Economic development may initially lead to environmental deterioration, but at a certain stage of economic development, environmental concerns come to the prominence of the public and policy decision-makers. They are ultimately in a better position to manage their wildlife and environment.

Free trade ultimately aids in accelerating this process, providing developing markets with access to new consumers bases, the potential for previously unobtainable growth and development and new competition. Freer trade also provides access to cleaner technology, as well as goods and services created in a more environmentally sensitive manner.

Greenhouse gas emissions as a by-product of transportation, manufacturing and production remains a disadvantageous environmental cost. One that may well cause some to question the necessity of free-trade. Of course, this is not entirely applicable for all products involved in trade. Nations can produce certain products or services in a more efficient manner than others. It has been argued that New Zealand lamb transported to the United Kingdom would generate 70% less CO2 than lamb produced in the United Kingdom. 

Nation-states are increasingly aware of the environmental costs free trade may entail. South Korea has included environmental chapters in all its free trade agreements since 2012, regardless of whether it was with a developing or developed nation, as part of a wider strategy to emerge as a world leader in environmental issues.

Through this strategy, South Korea has aided other nations in improving their own environmental programmes via bilateral agreements, including Vietnam, Ghana and the Solomon Islands. South Korea’s inclusion of environmental chapters in free trade agreements comes with few costs, making it attractive to developing economies to embrace their own environmental commitments in their own free trade agreements.

The Agreement on Climate Change, Trade and Sustainability (ACCTS) negotiations between New Zealand, Costa Rica, Norway, Iceland and Fiji are another example of free trade being conducted through the lens of environmental betterment. Provisions include the removal of tariffs on environmental goods and services, fossil fuel subsidies eventually being eliminated, and the development of voluntary guidelines for eco-labelling programmes and mechanisms. These negotiations may well set a precedent that synchronises free trade and environmental protection, demonstrating that stringent environmental policies are compatible with free trade.

While it may now appear that climate change is a crisis of capitalism and globalisation, there is no better mechanism for lifting millions out of poverty or countries into prosperity than free trade. Certainly, there are environmental costs to free trade. However, it is easier to impose environmental legislation in a prosperous economy than an underdeveloped one.


Written by Luke Warren

Luke Warren is a Senior Account Executive at BCW Global


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