James Galbraith and Jeff Faux debate trade
over at TAP
. I think I come down mostly on Galbraith's side of things, but I do have to take issue with some of what he wrote in his original essay
. For instance:
Environmental standards also won't ever become major tools of a trade policy. The first problem is that regulatory differences have little to do with environmental impact in consumer good production (mining and oil are different stories, but we don't buy minerals or oil from China). Firms installing new plant and equipment usually use the latest technologies because that is also the cheapest way to produce; newer technologies also tend to be cleaner. It is therefore quite possible for a foreign firm to cost American jobs while improving environmental quality -- replacing an old and dirtier American factory with a new and cleaner Asian one. (China has lots of very dirty factories, but not generally in the export trades.)
Okay, a few things: It's true that slipping environmental standards into trade deals won't prevent American factories from moving abroad. Even the World Bank--hardly filled with tree-huggers--will admit
"there is no evidence that the cost of environmental protection has ever been the determining factor in foreign investment decisions." But these protections are still worth promoting on their own terms. Using trade deals to force other countries to abide by international environmental agreements will improve the health of the planet without having terribly adverse effects.
And the flipside is that many trade deals actually weaken environmental protections. Take Costa Rica. Back in the 1990s, an oil company that was later bought by Harken Energy won a bid to drill along the Caribbean coast. In 2002, a national board ruled that the plan violated the country's environmental impact laws. Harken sued Costa Rica for $57 billion--three times the country's GDP. The Costa Rican courts have fended off the suit, but if the country ratifies CAFTA, those lawsuits would bypass the national courts and go to an international tribunal. Whether or not a suit like Harken's would succeed, the threat of a multi-billion dollar suit could be enough to convince many developing countries to back away from enforcing their environmental laws.
Stuff like this happens all the time in "free trade" deals. Depending on how they're crafted, environmental standards can make a big difference. Maybe not with China, but certainly elsewhere. This jibes with Galbraith's point later in his piece: The big problem with deals like CAFTA isn't that they steal jobs from the United States; it's that they're often predatory--or, at least, contain provisions that benefit large corporations at the expense of developing countries. Now, granted, trade-bashing Democrats don't always sell
environmental standards as a way to protect developing countries--and often that's not even how they're designed--but the larger principle is sound on the merits.
Josh Bivens, meanwhile, mounts
a similar defense of including labor standards in trade deals. They may not necessarily help American workers in the short term, but they can help protect workers abroad. (Actually, I'd go further than that, but this post is already getting long...)