Sustainable trade expansion in Latin America and the Caribbean : analysis and assessment

The report begins by discussing recent changes in trade policy and focuses on the sectoral impacts from these changes, their likely environmental consequences, and, finally, opportunities to promote more sustainable trade strategies. The report and its companion data tables provide, for the first time, a set of indicators to evaluate the impacts of trade on the environment in the region. These estimates cover 14 pollution categories in over 8 exporting sectors for 16 countries. The analysis draws attention to the sectors with the largest environmental impacts, notably, basic metals, industrial chemicals, and non-metal products. Although these sectors are likely to produce environmental "hot spots," trade liberalization will stimulate greater growth among industries with a smaller environmental footprint, including textiles, metal products, and food products. The assessment also shows that the environmental effects of trade vary greatly by degree and by location. The overall impact of trade on the environment is not easy to discern, since it depends on a variety of factors, including the efficiency with which resources are allocated, the scale of production, the composition of outputs, technology, and, last but far from least, policy. Ultimately, the political will to impose regulatory and liability discipline on environmental problems will determine whether trade liberalization enhances welfare. At the same time, trade policies should be constructed to minimize environmental problems. A recurring theme of the study is that increased market access in the developed countries of the region should be coupled to commitments to improve environmental performance in the developing countries. (Author abstract, modified)