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Technological change, trade and the environment
ECOLOGICAL ECONOMICS ELSEVIER
Ecological Economics 14 (1995) 185-193
Analysis
Technological change, trade and the environment Faye Duchin *, Glenn-Marie Lange, Georg Kell Institute for Economic Analysis, New York University, 269 Mercer Street, New York, N Y 10003, USA
Received 15 February 1994; accepted 3 March 1995
Abstract Trade policies and environmental policies have evolved largely independently, and until recently their interactions attracted little attention. There is much discussion of the institutional arrangements and economic instruments needed to embody environmental concerns in trade policy, but relatively little discussion of the role of technology. This paper describes the long-term, environmentally-motivated technological change involved in shifting from an "end-of-pipe" approach for capturing pollutants after they are generated to a focus on the prevention of environmental degradation. The new engineering field of Industrial Ecology promotes design and manufacturing practices that are based on an examination of the full life-cycle of a product in order to improve environmental performance. Industrial Ecology is spreading quickly in the industrialized countries, but its repercussions are transmitted widely through international trade. Plastics provide a good example of both the opportunities and the difficulties surrounding environmental protection, technological change, and trade. Concerns over solid waste in the rich countries may result in new market opportunities for biomass-based polymers, but the success of these products depends upon a complex set of factors, including very different alternative ways individual countries may choose to deal with solid waste. The implications for the developing countries are examined for the case of plastics, and more generally. Keywords: Industrial ecology; Solid waste; Plastics; Trade policies
1. Introduction Since W o r l d W a r II t h e r e has b e e n a b r o a d c o n s e n s u s t h a t l i b e r a l i z i n g i n t e r n a t i o n a l t r a d e is e s s e n t i a l to m a x i m i z i n g e c o n o m i c growth, a n d t h a t t h e l a t t e r is t h e f u n d a m e n t a l o b j e c t i v e o f t h e w o r l d system. R e f l e c t i n g t h a t view, t h e G e n e r a l A g r e e m e n t for Tariffs a n d T r a d e ( G A T T ) sets m u l t i l a t e r a l g r o u n d rules for r e m o v i n g b a r r i e r s to
* Corresponding author
t r a d e a n d a d j u d i c a t e s r e l a t e d t r a d e disputes. (Its successor, t h e W o r l d T r a d e O r g a n i z a t i o n , can b e e x p e c t e d to c o n t i n u e to p l a y this role.) H o w e v e r , significant c o n c e r n s a b o u t t h e e n v i r o n m e n t a l cons e q u e n c e s a s s o c i a t e d with e c o n o m i c growth, a n d s o m e t i m e s with specific t r a d e a r r a n g e m e n t s , have b e g u n to e m e r g e a n d a r e r e q u i r i n g a r e t h i n k i n g o f G A T T ' s functions. A r e c e n t issue o f this j o u r n a l (Vol. 9, No. 1, 1994) was d e v o t e d to t h e t h e m e o f t r a d e a n d the e n v i r o n m e n t . T h i s c o l l e c t i o n o f p a p e r s calls for new institutional arrangements, protocols, and
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economic instruments to regulate trade in the interests of satisfying not only economic but also environmental and social objectives. Only one of these papers, however, deals with underlying t e c h n o l o g i c a l c h a n g e s ( S t e i n i n g e r , 1994). Steininger concentrates on the near-term period during which he assumes that environmentally preferable technology will be more expensive than conventional technology, although he recognizes that this may not be the case in the longer term. His concern with near-term problems leads him to focus on trade distortions; by this he means the practices needed to protect against foreign competition a sector that incurs the added costs of environmentally preferable technology. This paper extends the discussion by examining some of the longer-term implications for trade of e n v i r o n m e n t a l l y - m o t i v a t e d technological change. Given the importance of international trade for all countries and the growing influence of environmental regulation, any country that intends to play an active role in the changing global economy, and not simply adapt to it, will need to take this longer-term perspective into account. Section 2 describes the current effects of environmentally-motivated technological changes on trade, including the appearance of new markets for goods and services associated with pollution abatement as well as "environmentally-friendly" consumer products. Section 3 is about the new technological initiatives associated with Industrial Ecology. Section 4 uses the example of plastics to illustrate the issues discussed in the other sections. The final section explores the implications of these changes, which originate for the most part in the developed countries, for the developing countries.
2. Near-term effects on trade of environmentallymotivated technological change
Deepening public concern about the environment is reflected in consumer behavior and government policy which in turn affect the decisions of private corporations. One result of these forces has been the emergence of a global market for pollution abatement and related services. Sales of
this so-called "environment industry" (OECD, 1992; US-EPA, 1993) are estimated at $200 billion in 1990, and the volume is expected to grow by 50 percent over the next 10 years (OECD, 1992, pp. 4, 13). High as they are, these figures include only the value of add-on equipment; the much larger future market for equipment associated with entirely new processes and products will be harder to distinguish, let alone quantify, since pollution reduction will not be its most salient characteristic. The pollution abatement industry is largely driven by legislative controls, and its technologies and products are often first developed by industries for their own use. It is therefore not surprising that O E C D countries account for 90 percent of world output: the major exporters are Germany, the United States, and Japan (OECD, 1992, p. 21). Demand for these products is expected to grow significantly in the coming decades in some developing countries, especially the newly-industrializing countries of Southeast Asia. East European countries also provide a large potential market for environmental clean up. In the O E C D countries, demand for pollution control goods and services may level off as emphasis shifts towards pollution prevention. Nonetheless, O E C D countries will still remain the principal producers and purchasers of these goods and services. Other new markets have emerged to satisfy consumers, mainly in affluent societies, who are willing to pay a premium for "green products" like organically-grown agricultural products, "dolphin-free" tuna, and textiles free of the anti-fungal chemical PCP. Environmental performance criteria have become a crucial feature for buyers of such diverse products as power generation equipment and household appliances (Geniilard, 1993; Baxter, 1993). A continuous stream of minor innovations to achieve "environmental soundness" has become important as a marketing device. At the same time, legislation may lead to abrupt contraction of other markets; past examples are asbestos, DDT, CFCs, and certain adhesive chemicals. Environmental policy in industrialized countries has had some less salutary effects as well,
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including the export of hazardous waste to developing countries and the relocation of "dirty" industries such as asbestos, heavy metals, and leather tanning to countries with less stringent environmental standards, often developing countries (United Nations, 1992). Conflict over international trade has arisen as countries with stricter standards for production accuse those with lower standards and cheaper production costs (often developing countries) of "environmental dumping" and call for levying countervailing duties on imports from those countries. While current trade rules under GATT do not allow countervailing duties under these circumstances--standards can be set for imported products, but not for the production processes--there is growing support for this type of measure to encourage stricter environmental controls in the short term (Steininger, 1994). The longer-term technological solutions to environmental problems discussed in the next section may reduce costs substantially relative to those associated with short-term solutions. Countervailing duties would then, in the longer term, be ineffective for the stated purpose.
3. From pollution control to pollution prevention: the emergence of Industrial Ecology In the past, environmental regulations were usually met through an end-of-pipe approach like "retrofitting" power plants with scrubbers for removing sulfur from flue gas. The incremental changes to existing technology that characterize this approach are increasingly viewed as inadequate to deal with the magnitude and complexity of environmental degradation. Retrofitting of pollution control devices virtually always increases the costs of production since it requires additional equipment with its associated energy, maintenance, and other inputs. But it is generally less costly in the short term than the outright replacement of existing capacity with new structures and equipment. As the structures and equipment in place today are replaced and existing capacity is expanded, fundamental changes will take place in
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industrial practices. In many cases it will be possible to meet increasingly stringent environmental standards in a less costly manner. In other cases, the qualitative changes in both output and environmental impact will be so far-reaching that it will not be possible to directly compare unit costs at the new production facility with the costs of one in operation today. Industrial Ecology is an integrated approach to design, production, maintenance, and disposal that is quickly becoming part of the engineering curriculum. Its entry into practice is naturally slower. Superior environmental characteristics take their place as a design criterion along with the engineer's usual emphasis on operational performance and cost. The purpose is to prevent environmental degradation instead of capturing pollutants through end-of-pipe solutions after they are generated. One can distinguish two different branches of Industrial Ecology. Eco-restructuring is associated with the conviction that new technologies will make possible the "dematerialization of production" to only several percent of current material requirements, and the "decarbonization of the energy system," most likely through the transition through natural gas to hydrogen; see, for example, Ayres (1991, 1995), and Rogner (1995). The United Nations University in Tokyo has a research program in Eco-restructuring; other centers are the Center for the Management of Environmental Resources at INSEAD in France and the Wuppertal Institute in Germany. Design for the Environment is the branch of Industrial Ecology associated with the design and implementation of solutions that are practical within a 5-10-year period. In the US the institutional initiative for Industrial Ecology has been taken by the National Academy of Engineering with the active participation of corporations, notably A T & T . For the proceedings of two conferences, see NAS (1992) and Allenby and Richards (1994); see also Ausubel and Sladovich (1989), Graedel and Allenby (1994), and Socolow (1995). Industrial Ecology may require organizational changes "such as the formation of cooperative relationships among suppliers, manufacturers, and waste management providers" (OTA, 1992,
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p. 53). As the entire production process within an establishment is opened to reassessment, corresponding changes may need to be considered in other establishments both upstream and downstream in the life cycle of a given product (Frosch, 1992). Changes in one establishment may require changes in input materials and equipment and their fabrication in other sectors, or changes in the way a product is used in other sectors and in its marketing, distribution, use by consumers, and final disposal. Industrial Ecology has already produced resuits and, by whatever name it ends up being called, is here to stay. One example of a successful redesign is the substitution of plant-based materials for lead in inks to facilitate the recycling of paper; a major obstacle to the recycling of paper was the toxic residue of heavy, metals. Some establishments have arranged to exchange wastes with others that could make economic use of them (OTA, 1992, pp. 81-82). Another application of a life-cycle assessment is the investment of electric utilities not only in increased energy efficiency of power plants, but also in "demand-side management". Provision of energy audits and encouraging energy-efficient behavior on the part of the users of electricity is generally cheaper than building new power plants. Germany's Waste and Packaging Law of 1991 initiated a pioneering effort to reduce and manage solid waste. While the German program has run into difficulties (mainly in the area of plastics), policies of this type will be improved and can be expected to lead to solutions built on a systems approach, especially once the legislation is extended to durable goods. The growing importance of Industrial Ecology for alleviating environmental problems has a number of implications for trade. Substantial economy of materials and material substitutions can be anticipated. This will tend to depress the demand for some commodities, notably virgin metals and minerals, while increasing demand for specific qualities of recycled materials. Since standards are generally set to be satisfied by "best available practice," as established by the technological leaders, environmental standards will increasingly reflect the characteristics
of industrial practices in the most advanced of the industrialized countries. However, the complexity of the problems, and specific differences among regions, may result in the adoption of different solutions and correspondingly different standards in different countries. This outcome effectively obstructs trade as it can be prohibitively expensive for a producer to meet different standards in different markets.
4. The case of plastics 1
The use and disposal of plastics made from petroleum products is coming under sharp scrutiny in developed economies because of their highly visible presence in the solid waste stream. Disposal of plastics has been identified as the most important future market for the waste management industry (OECD, 1992, p. 18). Products made of plastic are used for multiple purposes by virtually every sector of the economy, including packaging of consumer products and office supplies, durable equipment, and structural components in construction. In addition, solutions to the problems posed by plastics--a combination of source reduction, recycling, and biodegradability--require a mix of technological change and social change. Consequently, policy regarding the production, use, and disposal of plastics will have very far-reaching consequences. The plastics industry covers a wide range of products including bulk plastic resins (ISIC 3513), simple plastic products (ISIC 356), and engineering plastics (ISIC 3560). It is a relatively energyintensive sector with substantial requirements for capital and skilled labor in certain subsectors. Much of the technology for the production and processing of plastics originates in the developed countries where at least 75% of the production in each major category of plastics takes place (United Nations, 1990). While their share of the world export market is still under 10% for all the principal resins ( U N -
xThis discussion draws on Duchin (1995).
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CTAD, 1992, p. 50), developing countries have been rapidly increasing their production, use, and export of plastics and plastic products. All types of plastics continue to displace primary materials and paper, especially in developing countries where the substitution is still at a relatively early stage. In the developing world, bulk plastics and raw materials are produced mainly by those countries that already have a petrochemical industry based on their oil or natural gas. A few countries have developed an industrialization strategy around the production of plastics from imported hydrocarbon feedstocks; these include Brazil, Korea, and Taiwan (UNIDO, 1990). Industries that process bulk plastics into simple plastic products are widely distributed among the developing countries; they have relatively low skill requirements and can be operated on a small scale in rural areas. This production satisfies mainly domestic requirements for products like pipe and conduit and plastic bottles, and is expected to continue to grow rapidly (UNIDO, 1988). Engineering polymers are used in place of metals, glass, paper, and ceramics in a wide range of structural and manufacturing applications such as window frames, plumbing, machinery, auto parts, and electronics. Developing countries are not yet significant producers of these materials, but there are plans in the newly-industrializing Asian countries to invest heavily in this sector (UNIDO, 1991). Polymer solid wastes can be kept out of landfills by some combination of source reduction, recycling, and degradability of the material; the remaining wastes can be incinerated. The choice among these options will depend on cost factors (such as the price of petroleum feedstock), consumer decisions, and government regulations. Government policies that influence the choice of methods include mandated recycled content for specific products, mandated composting of solid waste, more stringent regulations governing incineration and disposal of sludge, or high solid waste disposal fees. The implications of such policy options are not evident, and all actors have been inclined to "wait and see." The need for analysis
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and public debate is particularly compelling in this area because the initiatives that best satisfy one method of disposal tend to thwart the other approaches. For example, if recycling is to be economic, a reliable waste stream needs to be assured. Consequently, investment in recycling reduces the incentive for future source reduction or the production of degradable polymers. The advantages of degradable plastics are exploitable only if the polymers end up in composting facilities, but few municipalities have the experience to manage them. In fact, many environmental advocacy groups and some industry groups oppose the introduction of degradable materials (except for medical disposables) because these materials would undermine recycling efforts and could end up exacerbating the litter problem (OTA, 1993, pp. 52, 73). If plastic waste is to be incinerated, there may be little incentive to change current practices and product specifications. Currently, all methods of dealing with plastics require substantial research to overcome obstacles to large-scale commercial operations. Even the practice of last resort, incineration, requires more effective means to prevent the emission of toxic chemicals in the waste gas in order to overcome community opposition to the siting of facilities. One mechanism for source reduction is the substitution of other materials for plastics. However, the most celebrated comparisons, such as McDonald's former polystyrene foam "clamshell" package vs. the r e p l a c e m e n t of bleached paper/polyethylene wrappers, or disposable vs. cloth diapers, are widely considered to be inconclusive as to their environmental implications. Such comparisons are complicated by the absence of technical or social criteria for comparing the tradeoffs between different kinds of problems (e.g., dirty water vs. air pollution). Source reduction can also be achieved by changing consumption patterns; see Duchin (1994) for an examination of the use of plastics in different categories of households. In many countries several categories of plastics are now separately collected for recycling, but very little recycling is actually taking place. Ger-
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many's ambitious recycling law is faltering over difficulties in recycling plastics (Genillard, 1993). A significant problem in the recycling of plastics is the expense and difficulty of collection and separation even among apparently homogeneous objects and polymers, not to mention objects of mixed composition and composite materials (Stein, 1992, pp. 836-837). An item as simple as the wafer-thin package used for snack foods contains nine layers of materials which are not readily separated (OTA, 1992, p. 9). The large-scale recycling of polymers requires designing the material with this objective in mind since only lowquality products can be made from comingled resins. Nonetheless, the purely technical problems pale beside the challenges posed by contamination of resins introduced by the consumer. Petrochemical-based polymers are not intrinsically degradable, and truly degradable ones are still in early stages of commercialization (Luzier, 1992). Plastics with a wide variety of attributes can be produced from biomass, but they are several times more expensive than comparable materials derived from hydrocarbons, and for this reason currently enjoy only specialty markets. Polymers derived from starches of annual crops such as corn and potatoes are in use in several specialized applications like packing materials, golf tees, and pharmaceutical capsules. Microbially derived degradable polymers were first used commercially in 1990 as consumer packaging (OTA, 1993, pp. 5-6). Bio-degradable plastics pose many challenges besides those surrounding their mechanical and chemical properties. Large-scale production would compete for land with forests or food crops, and intense competition could arise among countries because many are well situated to produce biomass in different forms. The need to compost agricultural wastes for the production of materials rather than returning them to the soil would place additional stress on the land used to grow crops. Finally, disposal sites for post-consumer wastes would need to be designed and managed as composting facilities, requiring substantial changes in practices for handling solid wastes. Despite the complications, the prospects for
biomass are real. Plant matter was displaced by coal and then petroleum as the feedstock of choice for making chemicals and industrial materials only in the course of this century in the industrialized countries. Today, paper is the one major industrial material still derived from biomass. In the past decade, however, environmental concerns have stimulated a resurgence of research and development about plant-derived materials and chemicals. A variety of surface coatings, pigments and dyes, printing inks, soaps and detergents, adhesives and glues, and plastics and resins with a full range of standard properties, plus unique advantages like biocompatibility, have been developed (Morris and Ahmed, 1992). In addition to biopolymers extracted from plants, there are those that are produced by biological systems such as microorganisms or animals, and those that are synthesized chemically from biological starting materials like amino acids or sugars (OTA, 1993, p. 5). A significant program is under way to commercialize polymers based on the jute crop of Bangladesh and India; it is hoped that such materials could replace the traditional uses, notably jute sacks, in which jute has already been largely displaced by propylene (personal communication with I. Koons, UNDP). Both Japan and the European Community have well-defined national biopolymer policies focused on development and commercialization of degradable materials to substitute for traditional commodity plastics and for use in biomedical applications. In these countries and in the US, research is being carried out in large, well-established chemical and agricultural firms as well as in the biotechnology sector. The principal plant feedstocks undergoing intensive study are those of importance in temperate climates like starch from corn, potatoes, rice, barley, sorghum, and wheat. It is difficult to determine whether jute and kenaf are ignored in this research for technical reasons or simply because they are tropical crops. The literature that is available on these fibrous plants suggests that they are promising feedstocks for materials of unique properties (see, for example, Rowell, 1993). An opportunity for products from jute could materialize if other developed countries adopt
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Germany's stringent laws on packaging and a consensus favoring biodegradability is achieved (United Nations Food and Agriculture Organization, 1992a,b,c,d). To exploit this opportunity, developing countries would require financial resources and scientific, engineering, and industrial capability to bring these products to the commercial stage. They would also require the information and clout that would permit them to participate in and influence the policy debates that are taking place mainly in the developed countries, but which affect the global economic system. FAO has held several workshops for developing countries on research and product development as well as marketing strategies for new materials from jute. However, a far larger scale effort would be needed to have a noticeable impact on the debates about plastics.
5. Implications for developing countries Developing countries find themselves in a situation that is both difficult and highly uncertain and in which technology plays a key role. They continue to depend upon the developed countries for the expertise surrounding environmental technology and find their ability to follow the state-ofthe-art of new technologies and new practices severely strained. Yet they need to do so because increasingly stringent product standards in developed countries, set on the basis of new "best practice" technologies, could effectively exclude their exports. The example of plastics described in the last section shows the difficulty of anticipating the future characteristics of plastic raw materials or products fabricated from or packaged in plastics, and the importance for developing countries of the outcomes. Compliance of exports with future product regulations in developed countries could require the use of new, environmentally-sound technologies which must be imported, even for items like packaging that they provided themselves in the past. Furthermore, the effect is not limited to manufactured goods, but also extends to raw materials and the methods used to extract them. For example, concerns about the unsustainable management of forests have led to calls for a boycott of wood
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products from some developing countries. The constraint of being "locked in" to old technologies because of past investment decisions, or other reasons for not responding in a timely fashion to emerging trends, may exclude a country from important future markets. As price structures in developed countries change to reflect environmental costs more fully, a price advantage for products and materials from developing countries may emerge; a possible prospect, but one requiring substantial further development, is kenaf-based paper (various other products are discussed in UNCTAD, 1994). In addition, new market entrants may be able to adopt new technologies in specific industries while established producers are still retrofitting old equipment; an example is totally chlorine-flee bleaching for paper. Nonetheless, stricter environmental regulation in the industrialized countries is likely in the near term to reduce the ability of developing countries to compete in international markets since these countries are less able to afford today's add-on technologies. With limited capital, research and development expertise, and political influence, it is unclear how the developing countries will make the transition to the lower-cost, longer-term solutions being developed by Industrial Ecologists. In addition, developing countries will be increasingly disadvantaged as their exports are required to comply with changing environmental standards designed to alleviate solid waste and other problems in the developed countries. All the uncertainties of the situation put a premium on flexibility and a strategic orientation toward combined public and private support of specific sectors and products. The design of development strategies needs to balance domestic social and environmental needs with prospects for export (see, for example, Duchin et al., 1993). The international community has yet to face the challenges of reconciling global environmental concerns with the pressures on the environment that have arisen from competition in an open, growing world economy. The industrialized countries have provided financial support and transferred technology to help developing countries reduce their contributions to specific global
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e n v i r o n m e n t a l p r o b l e m s - - f o r e x a m p l e , to halt the depletion of stratospheric ozone. The awareness is now e m e r g i n g t h a t g l o b a l c o o p e r a t i o n is r e q u i r e d to d e a l with g l o b a l issues as diverse as c l i m a t e c h a n g e , s u s t a i n a b l e m a n a g e m e n t o f the w o r l d ' s fisheries, a n d p r e s e r v i n g biodiversity. T h e r e a l i z a t i o n o f t h e b r e a d t h a n d s e r i o u s n e s s of t h e c h a l l e n g e s m a y p r o v i d e the m o t i v a t i o n for the i n d u s t r i a l i z e d c o u n t r i e s to assist t h e d e v e l o p i n g c o u n t r i e s to t a k e a m o r e c o m p r e h e n s i v e a n d s t r a t e g i c a p p r o a c h to e v a l u a t i n g t h e i r o p t i o n s for development. P o l i c y - m a k e r s a n d firms in d e v e l o p i n g countries n e e d to act e n e r g e t i c a l l y to e n s u r e t h a t environmentally-motivated technological change d o e s n o t b e c o m e a b a r r i e r to t h e i r t r a d e a n d d e v e l o p m e n t . I n t h e first instance, they n e e d to m o n i t o r a n d assess e n v i r o n m e n t a l t r e n d s in industrialized countries where many of the future s t a n d a r d s a n d t e c h n o l o g i c a l solutions a r e currently being determined. Market intelligence and u p - t o - d a t e i n f o r m a t i o n on e n v i r o n m e n t a l r e g u l a tions, t e c h n o l o g i c a l solutions, a n d o r g a n i z a t i o n a l changes are pre-conditions for informed decision-making. A t t h e s a m e time, it is r e a s o n a b l e to a n t i c i p a t e a substantial increase within international organiz a t i o n s in t h e p o w e r o f d e v e l o p i n g c o u n t r i e s , e s p e c i a l l y t h o s e with large p o p u l a t i o n s a n d r a p i d e c o n o m i c g r o w t h like C h i n a a n d the newly industrializing c o u n t r i e s o f A s i a . T h e s e c o u n t r i e s c o u l d reduce the global impact of the environmental p r a c t i c e s in t h e rich c o u n t r i e s by t r a d i n g increasingly a m o n g e a c h o t h e r , o r they c o u l d exert t h e i r g r o w i n g i n f l u e n c e to e n s u r e t h a t t r a d e policy reflects t h e i r p e r c e i v e d i n t e r e s t s with r e s p e c t to the choice o f p r o d u c t i o n p r o c e s s e s . T h e y a r e m o r e c o n c e r n e d with c l e a n w a t e r t h a n with k e e p i n g plastics o u t o f landfills, a n d with i n c r e a s i n g t h e n u m b e r o f cars r a t h e r t h a n t h e i r energy-efficiency. T h e i n c r e a s e d i n f l u e n c e o f t h e s e c o u n t r i e s will p u t d e v e l o p m e n t o n t h e e n v i r o n m e n t a l agenda.
Acknowledgements F a y e D u c h i n is the D i r e c t o r o f the I n s t i t u t e for E c o n o m i c A n a l y s i s ( I E A ) , a n d G l e n n - M a r i e
L a n g e is R e s e a r c h Scientist at I E A . G e o r g Kell is E c o n o m i c A f f a i r s O f f i c e r at t h e U N C T A D S e c r e tariat. T h e a u t h o r s a c k n o w l e d g e s u p p o r t f r o m U N C T A D u n d e r S S A # F 3 S / 3 6 1 , b u t a r e solely r e s p o n s i b l e for t h e views e x p r e s s e d in this p a p e r .
References Allenby, B. and D. Richards (Editors), 1994. The Greening of Industrial Ecosystems. National Academy Press, Washington, DC. Ausubel, J.H. and H.E. Sladovich (Editors), 1989. Technology and Environment. National Academy Press, Washington, DC. Ayres, R.U., 1991. Eco-restructuring: managing the transition to an ecologically sustainable economy. Unpublished proposal. IIASA and Carnegie-Mellon University, June. Ayres, R.U. (Editor), 1995. Eco-restructuring. Proceedings of United Nations University Symposium on Eco-Restructuring, July 5-7, 1993, Tokyo. United Nations University. Baxter, A. 1993. Tempted by green gadgetry. Financial Times, March 2 and May 25. Duchin, F., Hamilton, C. and Lange., G., 1993. Development and the Environment in Indonesia: An Input-Output Approach. Final Report to the Natural Resource Management Project of USAID, August. See also, Duchin and Lange, Final Report to the Environmental Programming Support Services Project of the Canadian International Development Agency, August. Duchin, F., 1994. Household Use and Disposal of Plastics. Report to the AT&T Industrial Ecology Faculty Fellowship Program, June. Duchin, F., 1995. The global economy in the 21st century. In: R. Ayres (Editor), Eco-restructuring. Proceedings, United Nations University Symposium on Eco-restructuring, July 5-7, 1993, Tokyo. United Nations University, Tokyo. Frosch, R.A., 1992. Industrial ecology: a philosophical introduction. Proc. Natl. Acad. Sci. USA, 89(3): 800-803. Genillard, A., 1993. Too much of a good thing. Financial Times, June 23. Graedel, T.E. and Allenby, B.R., 1994. Industrial Ecology. Prentice Hall, Englewood Cliffs, NJ. Luzier, W.D., 1992. Materials derived from biomass/biodegradable materials. Proc. Natl. Acad. Sci., 89(3): 839-842. Morris, D. and Ahmed, I., 1992. The Carbohydrate Economy: Making Chemicals and Industrial Materials from Plant Matter. Institute for Local Self-Reliance, Washington, DC. NAS (National Academy of Sciences of the US), 1992. Proceedings, 89(3): 793-1148. National Academy Press, Washington, DC. Proceedings of a conference on Industrial Ecology. OECD (Organization for Economic Cooperation and Development), 1992. The OECD Environment Industry: Situation, Prospects and Government Policies. OECD, Paris.
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OTA (United States Congress, Office of Technology), 1992. Green Products by Design: Choices for a Greener Environment. Publication No. OTA-E-541, US Government Printing Office. Washington, DC. OTA (United States Congress, Office of Technology Assessment), 1993. Biopolymers: Making Materials Nature's Way. Publication No. OTA-BP-E-102, US Government Printing Office, Washington, DC. Rogner, H., 1995. Global energy futures: the long-term perspective for eco-restructuring. In: R. Ayres et al. (Editors), Eco-restructuring. Proceedings of United Nations University Symposium on Eco-Restructuring, July 5-7, 1993, Tokyo. United Nations University. Rowell, R., 1993. Opportunities for composite materials from jute and kenaf. Paper presented at: United Nations Food and Agricultural Organization International Consultation on Jute and the Environment, October 26-29, 1993, The Hague, The Netherlands. Socoiow, R. (Editor), 1995. Industrial Ecology and Global Change. Cambridge University Press, New York. Stein, R., 1992. Polymer recycling: opportunities and limitations. Proc. Natl. Acad. Sci., 89(3): 835-838. Steininger, K., 1994. Trade, environment, and development: the issues in perspective. J. Ecol. Econ., 9(1): 23-42. UNCTAD (United Nations Conference on Trade and Development), 1992. Handbook of International Trade and Development Statistics. United Nations, Geneva. UNCTAD (United Nations Conference on Trade and Development), 1994. Identification of Means by Which the Competitiveness of Natural Products with Environmental Advantages Could Be Improved, T D / B / C N . 1 / 2 5 , August.
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UNIDO (United Nations Industrial Development Organization (UNIDO), 1988. Global Report. United Nations, New York. UNIDO (United Nations Industrial Development Organization), 1990. Global Report. United Nations, New York. UNIDO (United Nations Industrial Development Organization), 1991. Global Report. United Nations, New York. United Nations, 1992. World Investment Report. United Nations, New York. United Nations, 1990. Industrial Statistics Yearbook. United Nations, New York. United Nations Food and Agriculture Organization (FAO), Committee on Commodity Problems, 1992a. Jute: Competition with Plastics. CCP: JU 92/3. FAO, Rome. August. United Nations Food and Agriculture Organization (FAO), Committee on Commodity Problems, 1992b. Information Note on Degradable Plastics. CCP: JU 92/4. FAO, Rome. June. United Nations Food and Agriculture Organization (FAO), Committee on Commodity Problems, 1992c. Developments in Regulatory Measures Affecting Packaging. CCP: JU 92/8. FAO: Rome. August. United Nations Food and Agriculture Organization (FAO), Committee on Commodity Problems, 1992d. Report of the Twenty-Eighth Session of the Intergovernmental Group on Jute, Kenaf and Allied Fibres. CCP:93/12. FAO, Rome, November. US-EPA (United States Environmental Protection Agency), 1993. International Trade in Environmental Protection Equipment. EPA, Washington, DC.
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Analysis
Technological change, trade and the environment Faye Duchin *, Glenn-Marie Lange, Georg Kell Institute for Economic Analysis, New York University, 269 Mercer Street, New York, N Y 10003, USA
Received 15 February 1994; accepted 3 March 1995
Abstract Trade policies and environmental policies have evolved largely independently, and until recently their interactions attracted little attention. There is much discussion of the institutional arrangements and economic instruments needed to embody environmental concerns in trade policy, but relatively little discussion of the role of technology. This paper describes the long-term, environmentally-motivated technological change involved in shifting from an "end-of-pipe" approach for capturing pollutants after they are generated to a focus on the prevention of environmental degradation. The new engineering field of Industrial Ecology promotes design and manufacturing practices that are based on an examination of the full life-cycle of a product in order to improve environmental performance. Industrial Ecology is spreading quickly in the industrialized countries, but its repercussions are transmitted widely through international trade. Plastics provide a good example of both the opportunities and the difficulties surrounding environmental protection, technological change, and trade. Concerns over solid waste in the rich countries may result in new market opportunities for biomass-based polymers, but the success of these products depends upon a complex set of factors, including very different alternative ways individual countries may choose to deal with solid waste. The implications for the developing countries are examined for the case of plastics, and more generally. Keywords: Industrial ecology; Solid waste; Plastics; Trade policies
1. Introduction Since W o r l d W a r II t h e r e has b e e n a b r o a d c o n s e n s u s t h a t l i b e r a l i z i n g i n t e r n a t i o n a l t r a d e is e s s e n t i a l to m a x i m i z i n g e c o n o m i c growth, a n d t h a t t h e l a t t e r is t h e f u n d a m e n t a l o b j e c t i v e o f t h e w o r l d system. R e f l e c t i n g t h a t view, t h e G e n e r a l A g r e e m e n t for Tariffs a n d T r a d e ( G A T T ) sets m u l t i l a t e r a l g r o u n d rules for r e m o v i n g b a r r i e r s to
* Corresponding author
t r a d e a n d a d j u d i c a t e s r e l a t e d t r a d e disputes. (Its successor, t h e W o r l d T r a d e O r g a n i z a t i o n , can b e e x p e c t e d to c o n t i n u e to p l a y this role.) H o w e v e r , significant c o n c e r n s a b o u t t h e e n v i r o n m e n t a l cons e q u e n c e s a s s o c i a t e d with e c o n o m i c growth, a n d s o m e t i m e s with specific t r a d e a r r a n g e m e n t s , have b e g u n to e m e r g e a n d a r e r e q u i r i n g a r e t h i n k i n g o f G A T T ' s functions. A r e c e n t issue o f this j o u r n a l (Vol. 9, No. 1, 1994) was d e v o t e d to t h e t h e m e o f t r a d e a n d the e n v i r o n m e n t . T h i s c o l l e c t i o n o f p a p e r s calls for new institutional arrangements, protocols, and
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economic instruments to regulate trade in the interests of satisfying not only economic but also environmental and social objectives. Only one of these papers, however, deals with underlying t e c h n o l o g i c a l c h a n g e s ( S t e i n i n g e r , 1994). Steininger concentrates on the near-term period during which he assumes that environmentally preferable technology will be more expensive than conventional technology, although he recognizes that this may not be the case in the longer term. His concern with near-term problems leads him to focus on trade distortions; by this he means the practices needed to protect against foreign competition a sector that incurs the added costs of environmentally preferable technology. This paper extends the discussion by examining some of the longer-term implications for trade of e n v i r o n m e n t a l l y - m o t i v a t e d technological change. Given the importance of international trade for all countries and the growing influence of environmental regulation, any country that intends to play an active role in the changing global economy, and not simply adapt to it, will need to take this longer-term perspective into account. Section 2 describes the current effects of environmentally-motivated technological changes on trade, including the appearance of new markets for goods and services associated with pollution abatement as well as "environmentally-friendly" consumer products. Section 3 is about the new technological initiatives associated with Industrial Ecology. Section 4 uses the example of plastics to illustrate the issues discussed in the other sections. The final section explores the implications of these changes, which originate for the most part in the developed countries, for the developing countries.
2. Near-term effects on trade of environmentallymotivated technological change
Deepening public concern about the environment is reflected in consumer behavior and government policy which in turn affect the decisions of private corporations. One result of these forces has been the emergence of a global market for pollution abatement and related services. Sales of
this so-called "environment industry" (OECD, 1992; US-EPA, 1993) are estimated at $200 billion in 1990, and the volume is expected to grow by 50 percent over the next 10 years (OECD, 1992, pp. 4, 13). High as they are, these figures include only the value of add-on equipment; the much larger future market for equipment associated with entirely new processes and products will be harder to distinguish, let alone quantify, since pollution reduction will not be its most salient characteristic. The pollution abatement industry is largely driven by legislative controls, and its technologies and products are often first developed by industries for their own use. It is therefore not surprising that O E C D countries account for 90 percent of world output: the major exporters are Germany, the United States, and Japan (OECD, 1992, p. 21). Demand for these products is expected to grow significantly in the coming decades in some developing countries, especially the newly-industrializing countries of Southeast Asia. East European countries also provide a large potential market for environmental clean up. In the O E C D countries, demand for pollution control goods and services may level off as emphasis shifts towards pollution prevention. Nonetheless, O E C D countries will still remain the principal producers and purchasers of these goods and services. Other new markets have emerged to satisfy consumers, mainly in affluent societies, who are willing to pay a premium for "green products" like organically-grown agricultural products, "dolphin-free" tuna, and textiles free of the anti-fungal chemical PCP. Environmental performance criteria have become a crucial feature for buyers of such diverse products as power generation equipment and household appliances (Geniilard, 1993; Baxter, 1993). A continuous stream of minor innovations to achieve "environmental soundness" has become important as a marketing device. At the same time, legislation may lead to abrupt contraction of other markets; past examples are asbestos, DDT, CFCs, and certain adhesive chemicals. Environmental policy in industrialized countries has had some less salutary effects as well,
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including the export of hazardous waste to developing countries and the relocation of "dirty" industries such as asbestos, heavy metals, and leather tanning to countries with less stringent environmental standards, often developing countries (United Nations, 1992). Conflict over international trade has arisen as countries with stricter standards for production accuse those with lower standards and cheaper production costs (often developing countries) of "environmental dumping" and call for levying countervailing duties on imports from those countries. While current trade rules under GATT do not allow countervailing duties under these circumstances--standards can be set for imported products, but not for the production processes--there is growing support for this type of measure to encourage stricter environmental controls in the short term (Steininger, 1994). The longer-term technological solutions to environmental problems discussed in the next section may reduce costs substantially relative to those associated with short-term solutions. Countervailing duties would then, in the longer term, be ineffective for the stated purpose.
3. From pollution control to pollution prevention: the emergence of Industrial Ecology In the past, environmental regulations were usually met through an end-of-pipe approach like "retrofitting" power plants with scrubbers for removing sulfur from flue gas. The incremental changes to existing technology that characterize this approach are increasingly viewed as inadequate to deal with the magnitude and complexity of environmental degradation. Retrofitting of pollution control devices virtually always increases the costs of production since it requires additional equipment with its associated energy, maintenance, and other inputs. But it is generally less costly in the short term than the outright replacement of existing capacity with new structures and equipment. As the structures and equipment in place today are replaced and existing capacity is expanded, fundamental changes will take place in
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industrial practices. In many cases it will be possible to meet increasingly stringent environmental standards in a less costly manner. In other cases, the qualitative changes in both output and environmental impact will be so far-reaching that it will not be possible to directly compare unit costs at the new production facility with the costs of one in operation today. Industrial Ecology is an integrated approach to design, production, maintenance, and disposal that is quickly becoming part of the engineering curriculum. Its entry into practice is naturally slower. Superior environmental characteristics take their place as a design criterion along with the engineer's usual emphasis on operational performance and cost. The purpose is to prevent environmental degradation instead of capturing pollutants through end-of-pipe solutions after they are generated. One can distinguish two different branches of Industrial Ecology. Eco-restructuring is associated with the conviction that new technologies will make possible the "dematerialization of production" to only several percent of current material requirements, and the "decarbonization of the energy system," most likely through the transition through natural gas to hydrogen; see, for example, Ayres (1991, 1995), and Rogner (1995). The United Nations University in Tokyo has a research program in Eco-restructuring; other centers are the Center for the Management of Environmental Resources at INSEAD in France and the Wuppertal Institute in Germany. Design for the Environment is the branch of Industrial Ecology associated with the design and implementation of solutions that are practical within a 5-10-year period. In the US the institutional initiative for Industrial Ecology has been taken by the National Academy of Engineering with the active participation of corporations, notably A T & T . For the proceedings of two conferences, see NAS (1992) and Allenby and Richards (1994); see also Ausubel and Sladovich (1989), Graedel and Allenby (1994), and Socolow (1995). Industrial Ecology may require organizational changes "such as the formation of cooperative relationships among suppliers, manufacturers, and waste management providers" (OTA, 1992,
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p. 53). As the entire production process within an establishment is opened to reassessment, corresponding changes may need to be considered in other establishments both upstream and downstream in the life cycle of a given product (Frosch, 1992). Changes in one establishment may require changes in input materials and equipment and their fabrication in other sectors, or changes in the way a product is used in other sectors and in its marketing, distribution, use by consumers, and final disposal. Industrial Ecology has already produced resuits and, by whatever name it ends up being called, is here to stay. One example of a successful redesign is the substitution of plant-based materials for lead in inks to facilitate the recycling of paper; a major obstacle to the recycling of paper was the toxic residue of heavy, metals. Some establishments have arranged to exchange wastes with others that could make economic use of them (OTA, 1992, pp. 81-82). Another application of a life-cycle assessment is the investment of electric utilities not only in increased energy efficiency of power plants, but also in "demand-side management". Provision of energy audits and encouraging energy-efficient behavior on the part of the users of electricity is generally cheaper than building new power plants. Germany's Waste and Packaging Law of 1991 initiated a pioneering effort to reduce and manage solid waste. While the German program has run into difficulties (mainly in the area of plastics), policies of this type will be improved and can be expected to lead to solutions built on a systems approach, especially once the legislation is extended to durable goods. The growing importance of Industrial Ecology for alleviating environmental problems has a number of implications for trade. Substantial economy of materials and material substitutions can be anticipated. This will tend to depress the demand for some commodities, notably virgin metals and minerals, while increasing demand for specific qualities of recycled materials. Since standards are generally set to be satisfied by "best available practice," as established by the technological leaders, environmental standards will increasingly reflect the characteristics
of industrial practices in the most advanced of the industrialized countries. However, the complexity of the problems, and specific differences among regions, may result in the adoption of different solutions and correspondingly different standards in different countries. This outcome effectively obstructs trade as it can be prohibitively expensive for a producer to meet different standards in different markets.
4. The case of plastics 1
The use and disposal of plastics made from petroleum products is coming under sharp scrutiny in developed economies because of their highly visible presence in the solid waste stream. Disposal of plastics has been identified as the most important future market for the waste management industry (OECD, 1992, p. 18). Products made of plastic are used for multiple purposes by virtually every sector of the economy, including packaging of consumer products and office supplies, durable equipment, and structural components in construction. In addition, solutions to the problems posed by plastics--a combination of source reduction, recycling, and biodegradability--require a mix of technological change and social change. Consequently, policy regarding the production, use, and disposal of plastics will have very far-reaching consequences. The plastics industry covers a wide range of products including bulk plastic resins (ISIC 3513), simple plastic products (ISIC 356), and engineering plastics (ISIC 3560). It is a relatively energyintensive sector with substantial requirements for capital and skilled labor in certain subsectors. Much of the technology for the production and processing of plastics originates in the developed countries where at least 75% of the production in each major category of plastics takes place (United Nations, 1990). While their share of the world export market is still under 10% for all the principal resins ( U N -
xThis discussion draws on Duchin (1995).
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CTAD, 1992, p. 50), developing countries have been rapidly increasing their production, use, and export of plastics and plastic products. All types of plastics continue to displace primary materials and paper, especially in developing countries where the substitution is still at a relatively early stage. In the developing world, bulk plastics and raw materials are produced mainly by those countries that already have a petrochemical industry based on their oil or natural gas. A few countries have developed an industrialization strategy around the production of plastics from imported hydrocarbon feedstocks; these include Brazil, Korea, and Taiwan (UNIDO, 1990). Industries that process bulk plastics into simple plastic products are widely distributed among the developing countries; they have relatively low skill requirements and can be operated on a small scale in rural areas. This production satisfies mainly domestic requirements for products like pipe and conduit and plastic bottles, and is expected to continue to grow rapidly (UNIDO, 1988). Engineering polymers are used in place of metals, glass, paper, and ceramics in a wide range of structural and manufacturing applications such as window frames, plumbing, machinery, auto parts, and electronics. Developing countries are not yet significant producers of these materials, but there are plans in the newly-industrializing Asian countries to invest heavily in this sector (UNIDO, 1991). Polymer solid wastes can be kept out of landfills by some combination of source reduction, recycling, and degradability of the material; the remaining wastes can be incinerated. The choice among these options will depend on cost factors (such as the price of petroleum feedstock), consumer decisions, and government regulations. Government policies that influence the choice of methods include mandated recycled content for specific products, mandated composting of solid waste, more stringent regulations governing incineration and disposal of sludge, or high solid waste disposal fees. The implications of such policy options are not evident, and all actors have been inclined to "wait and see." The need for analysis
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and public debate is particularly compelling in this area because the initiatives that best satisfy one method of disposal tend to thwart the other approaches. For example, if recycling is to be economic, a reliable waste stream needs to be assured. Consequently, investment in recycling reduces the incentive for future source reduction or the production of degradable polymers. The advantages of degradable plastics are exploitable only if the polymers end up in composting facilities, but few municipalities have the experience to manage them. In fact, many environmental advocacy groups and some industry groups oppose the introduction of degradable materials (except for medical disposables) because these materials would undermine recycling efforts and could end up exacerbating the litter problem (OTA, 1993, pp. 52, 73). If plastic waste is to be incinerated, there may be little incentive to change current practices and product specifications. Currently, all methods of dealing with plastics require substantial research to overcome obstacles to large-scale commercial operations. Even the practice of last resort, incineration, requires more effective means to prevent the emission of toxic chemicals in the waste gas in order to overcome community opposition to the siting of facilities. One mechanism for source reduction is the substitution of other materials for plastics. However, the most celebrated comparisons, such as McDonald's former polystyrene foam "clamshell" package vs. the r e p l a c e m e n t of bleached paper/polyethylene wrappers, or disposable vs. cloth diapers, are widely considered to be inconclusive as to their environmental implications. Such comparisons are complicated by the absence of technical or social criteria for comparing the tradeoffs between different kinds of problems (e.g., dirty water vs. air pollution). Source reduction can also be achieved by changing consumption patterns; see Duchin (1994) for an examination of the use of plastics in different categories of households. In many countries several categories of plastics are now separately collected for recycling, but very little recycling is actually taking place. Ger-
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many's ambitious recycling law is faltering over difficulties in recycling plastics (Genillard, 1993). A significant problem in the recycling of plastics is the expense and difficulty of collection and separation even among apparently homogeneous objects and polymers, not to mention objects of mixed composition and composite materials (Stein, 1992, pp. 836-837). An item as simple as the wafer-thin package used for snack foods contains nine layers of materials which are not readily separated (OTA, 1992, p. 9). The large-scale recycling of polymers requires designing the material with this objective in mind since only lowquality products can be made from comingled resins. Nonetheless, the purely technical problems pale beside the challenges posed by contamination of resins introduced by the consumer. Petrochemical-based polymers are not intrinsically degradable, and truly degradable ones are still in early stages of commercialization (Luzier, 1992). Plastics with a wide variety of attributes can be produced from biomass, but they are several times more expensive than comparable materials derived from hydrocarbons, and for this reason currently enjoy only specialty markets. Polymers derived from starches of annual crops such as corn and potatoes are in use in several specialized applications like packing materials, golf tees, and pharmaceutical capsules. Microbially derived degradable polymers were first used commercially in 1990 as consumer packaging (OTA, 1993, pp. 5-6). Bio-degradable plastics pose many challenges besides those surrounding their mechanical and chemical properties. Large-scale production would compete for land with forests or food crops, and intense competition could arise among countries because many are well situated to produce biomass in different forms. The need to compost agricultural wastes for the production of materials rather than returning them to the soil would place additional stress on the land used to grow crops. Finally, disposal sites for post-consumer wastes would need to be designed and managed as composting facilities, requiring substantial changes in practices for handling solid wastes. Despite the complications, the prospects for
biomass are real. Plant matter was displaced by coal and then petroleum as the feedstock of choice for making chemicals and industrial materials only in the course of this century in the industrialized countries. Today, paper is the one major industrial material still derived from biomass. In the past decade, however, environmental concerns have stimulated a resurgence of research and development about plant-derived materials and chemicals. A variety of surface coatings, pigments and dyes, printing inks, soaps and detergents, adhesives and glues, and plastics and resins with a full range of standard properties, plus unique advantages like biocompatibility, have been developed (Morris and Ahmed, 1992). In addition to biopolymers extracted from plants, there are those that are produced by biological systems such as microorganisms or animals, and those that are synthesized chemically from biological starting materials like amino acids or sugars (OTA, 1993, p. 5). A significant program is under way to commercialize polymers based on the jute crop of Bangladesh and India; it is hoped that such materials could replace the traditional uses, notably jute sacks, in which jute has already been largely displaced by propylene (personal communication with I. Koons, UNDP). Both Japan and the European Community have well-defined national biopolymer policies focused on development and commercialization of degradable materials to substitute for traditional commodity plastics and for use in biomedical applications. In these countries and in the US, research is being carried out in large, well-established chemical and agricultural firms as well as in the biotechnology sector. The principal plant feedstocks undergoing intensive study are those of importance in temperate climates like starch from corn, potatoes, rice, barley, sorghum, and wheat. It is difficult to determine whether jute and kenaf are ignored in this research for technical reasons or simply because they are tropical crops. The literature that is available on these fibrous plants suggests that they are promising feedstocks for materials of unique properties (see, for example, Rowell, 1993). An opportunity for products from jute could materialize if other developed countries adopt
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Germany's stringent laws on packaging and a consensus favoring biodegradability is achieved (United Nations Food and Agriculture Organization, 1992a,b,c,d). To exploit this opportunity, developing countries would require financial resources and scientific, engineering, and industrial capability to bring these products to the commercial stage. They would also require the information and clout that would permit them to participate in and influence the policy debates that are taking place mainly in the developed countries, but which affect the global economic system. FAO has held several workshops for developing countries on research and product development as well as marketing strategies for new materials from jute. However, a far larger scale effort would be needed to have a noticeable impact on the debates about plastics.
5. Implications for developing countries Developing countries find themselves in a situation that is both difficult and highly uncertain and in which technology plays a key role. They continue to depend upon the developed countries for the expertise surrounding environmental technology and find their ability to follow the state-ofthe-art of new technologies and new practices severely strained. Yet they need to do so because increasingly stringent product standards in developed countries, set on the basis of new "best practice" technologies, could effectively exclude their exports. The example of plastics described in the last section shows the difficulty of anticipating the future characteristics of plastic raw materials or products fabricated from or packaged in plastics, and the importance for developing countries of the outcomes. Compliance of exports with future product regulations in developed countries could require the use of new, environmentally-sound technologies which must be imported, even for items like packaging that they provided themselves in the past. Furthermore, the effect is not limited to manufactured goods, but also extends to raw materials and the methods used to extract them. For example, concerns about the unsustainable management of forests have led to calls for a boycott of wood
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products from some developing countries. The constraint of being "locked in" to old technologies because of past investment decisions, or other reasons for not responding in a timely fashion to emerging trends, may exclude a country from important future markets. As price structures in developed countries change to reflect environmental costs more fully, a price advantage for products and materials from developing countries may emerge; a possible prospect, but one requiring substantial further development, is kenaf-based paper (various other products are discussed in UNCTAD, 1994). In addition, new market entrants may be able to adopt new technologies in specific industries while established producers are still retrofitting old equipment; an example is totally chlorine-flee bleaching for paper. Nonetheless, stricter environmental regulation in the industrialized countries is likely in the near term to reduce the ability of developing countries to compete in international markets since these countries are less able to afford today's add-on technologies. With limited capital, research and development expertise, and political influence, it is unclear how the developing countries will make the transition to the lower-cost, longer-term solutions being developed by Industrial Ecologists. In addition, developing countries will be increasingly disadvantaged as their exports are required to comply with changing environmental standards designed to alleviate solid waste and other problems in the developed countries. All the uncertainties of the situation put a premium on flexibility and a strategic orientation toward combined public and private support of specific sectors and products. The design of development strategies needs to balance domestic social and environmental needs with prospects for export (see, for example, Duchin et al., 1993). The international community has yet to face the challenges of reconciling global environmental concerns with the pressures on the environment that have arisen from competition in an open, growing world economy. The industrialized countries have provided financial support and transferred technology to help developing countries reduce their contributions to specific global
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e n v i r o n m e n t a l p r o b l e m s - - f o r e x a m p l e , to halt the depletion of stratospheric ozone. The awareness is now e m e r g i n g t h a t g l o b a l c o o p e r a t i o n is r e q u i r e d to d e a l with g l o b a l issues as diverse as c l i m a t e c h a n g e , s u s t a i n a b l e m a n a g e m e n t o f the w o r l d ' s fisheries, a n d p r e s e r v i n g biodiversity. T h e r e a l i z a t i o n o f t h e b r e a d t h a n d s e r i o u s n e s s of t h e c h a l l e n g e s m a y p r o v i d e the m o t i v a t i o n for the i n d u s t r i a l i z e d c o u n t r i e s to assist t h e d e v e l o p i n g c o u n t r i e s to t a k e a m o r e c o m p r e h e n s i v e a n d s t r a t e g i c a p p r o a c h to e v a l u a t i n g t h e i r o p t i o n s for development. P o l i c y - m a k e r s a n d firms in d e v e l o p i n g countries n e e d to act e n e r g e t i c a l l y to e n s u r e t h a t environmentally-motivated technological change d o e s n o t b e c o m e a b a r r i e r to t h e i r t r a d e a n d d e v e l o p m e n t . I n t h e first instance, they n e e d to m o n i t o r a n d assess e n v i r o n m e n t a l t r e n d s in industrialized countries where many of the future s t a n d a r d s a n d t e c h n o l o g i c a l solutions a r e currently being determined. Market intelligence and u p - t o - d a t e i n f o r m a t i o n on e n v i r o n m e n t a l r e g u l a tions, t e c h n o l o g i c a l solutions, a n d o r g a n i z a t i o n a l changes are pre-conditions for informed decision-making. A t t h e s a m e time, it is r e a s o n a b l e to a n t i c i p a t e a substantial increase within international organiz a t i o n s in t h e p o w e r o f d e v e l o p i n g c o u n t r i e s , e s p e c i a l l y t h o s e with large p o p u l a t i o n s a n d r a p i d e c o n o m i c g r o w t h like C h i n a a n d the newly industrializing c o u n t r i e s o f A s i a . T h e s e c o u n t r i e s c o u l d reduce the global impact of the environmental p r a c t i c e s in t h e rich c o u n t r i e s by t r a d i n g increasingly a m o n g e a c h o t h e r , o r they c o u l d exert t h e i r g r o w i n g i n f l u e n c e to e n s u r e t h a t t r a d e policy reflects t h e i r p e r c e i v e d i n t e r e s t s with r e s p e c t to the choice o f p r o d u c t i o n p r o c e s s e s . T h e y a r e m o r e c o n c e r n e d with c l e a n w a t e r t h a n with k e e p i n g plastics o u t o f landfills, a n d with i n c r e a s i n g t h e n u m b e r o f cars r a t h e r t h a n t h e i r energy-efficiency. T h e i n c r e a s e d i n f l u e n c e o f t h e s e c o u n t r i e s will p u t d e v e l o p m e n t o n t h e e n v i r o n m e n t a l agenda.
Acknowledgements F a y e D u c h i n is the D i r e c t o r o f the I n s t i t u t e for E c o n o m i c A n a l y s i s ( I E A ) , a n d G l e n n - M a r i e
L a n g e is R e s e a r c h Scientist at I E A . G e o r g Kell is E c o n o m i c A f f a i r s O f f i c e r at t h e U N C T A D S e c r e tariat. T h e a u t h o r s a c k n o w l e d g e s u p p o r t f r o m U N C T A D u n d e r S S A # F 3 S / 3 6 1 , b u t a r e solely r e s p o n s i b l e for t h e views e x p r e s s e d in this p a p e r .
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