Influence of Environmental Issues on Global Tade
International business, as the trade of goods and services between countries, is affected by a number of diverse factors. Those include political relations between the authorities of the states, inflation, government policies, digitalization and so on.
However, environmental issues also influence global trade significantly in different ways. For instance, according to the World Economic Forum (WTO), maritime shipping makes up approximately 80% of international trade. Yet a lot of ports are not prepared to resist frequent storms or flooding, which may result in the mass port closure, especially in developing countries. Therefore, global trade will be affected. From the given example it can be seen that although many politicians and economists tend to put other determinants of the future of trade in a spotlight, the environmental challenges and their consequences, which will be discussed in detail later, have to be considered as well, since they threaten geopolitics and global economics in different ways.
It is worth stating at this point that currently trade is rather vulnerable to the climate change, pollution and other potential ecological issues, thus it will experience various modifications. The authorities, environmental ministries and global international organizations such as World Trade Organization (WTO) must cooperatively work on making it more sustainable.
This essay will discuss the possible outlook for the future of international business with regards to the current major environmental concerns and provide my personal opinion on the best solution to the proposed issue.
Let us begin with taking a closer look at the concept of International business. International business or international trade refers to the transaction of goods, services, knowledge and technology between different countries. From a historical perspective, it has developed as a part of globalization, the process of integration between nations, and has grown rapidly over the past centuries. The first trade connections were established in the ancient world, where oriental races exchanged silk, spices and precious metals. Despite that, in according to statistics (“1500–1800: Trade growth rates” by O’Rourke and Williamson), the level of international trade driven by colonialism had remained quite low until 1800 - the index was below 10%. The 19th century marks the start of the so called first “wave of globalization”, which had a positive impact on trade - the index has surged to nearly 30%.
The second “wave” was triggered by the Second World War and accompanied by technological progress, including the advancement of aviation and the merchant marines. Besides, the expansion of international trade has resulted in the increased transportation use.
It is important to understand, that complex ecological issues of nowadays, which international business faces at the moment and will face in the future were caused or aggravated by international business itself. I believe that the connection between these 2 things cannot be ignored: global business uses technology to expand and deal with environmental challenges, which gives rise to the new ecological issues.
Until early 1970s, there were no actual concerns about the correlation between trade and the environment. That said, a decade later most of the developed countries expressed agitation due to a rise of more serious ecological problems, for example, the climate change and pollution.
Eventually, transportation services and technology development, environmental negligence, inefficient use of resources and other actions have caused the ecological degradation and a range of problems which will remain for an indefinite period of time.
The “greenhouse effect” - warming that occurs when the atmosphere locks heat radiating from our planet - is known to be one of the major concerns. According to some trade economists, levels of greenhouse gas emissions have increased due to the higher economic activity from expanded trade. Climate change and global warming have resulted as the consequence of the “greenhouse effect”. The Intergovernmental Panel on Climate Change (IPCC) predicts a rise in temperature of 2.5 to 10 degrees Fahrenheit and the considerable increase (from 1 to 4 feet) in sea levels by the end of 21st century.
Overall, there is a range of ways in which climate change and global warming impact international trade. One of the aspects is, undoubtedly, transportation systems. Research suggests that all models of transport relevant to global business will be modified due to their inability to withstand frequent storms, rising sea levels, extreme precipitation and so on. Moreover, the
destruction of road and bridge infrastructure, especially in the weather-exposed areas, is expected. To illustrate, the bridges in the United States are designed to endure storms that have the following probability of occurring: once in 100 years. That said, due to the rapid climate change, such storms may occur every 20 years, given that it is barely possible to give the approximate calculation.
Another concern is the vulnerability of maritime shipping of goods, which accounts for 80% of global trade. Strong storms, flooding and other disasters may lead to the mass port shutdown, thereby damaging the economy of particular countries and influencing their contribution to global trade.
International business is forecasted to face another issue caused by global warming and climate change - the increased poverty in developing countries. In such areas people depend exclusively on their habitat since it determines the goods they can produce and trade. However, serious changes in that natural habitat are already being noted. In Latin America, for instance, climate change has provoked the prompt expansion of the fungus which kills trees and coffee plantations. High sea temperatures induced by global warming result in ocean acidification, leading to the decrease of fish stocks. Research suggests, that up to 50% of living species can disappear within this century. Even though trade is assumed to improve the poverty situation, it will become much harder, if not impossible, considering that many countries such as Africa may lose the ability to trade natural goods. Finally, poverty itself will influence global trade in a negative way.
The next ecological problem relevant to global business is environmental pollution. It can be defined as the introduction of new and not typical contaminants, which exceed their natural level and cause changes in the environment. The industrial activities such as road construction, commodity production and urbanization lead to the significant damage of nature and human health. What is more, transportation of commodities for global trade and its other aspects also contribute to the emission of substances and pollution.
As a consequence, human health concerns and the desire to contribute to the problem (for example, by reducing the plastic and other artificial substances consumption in their daily life, which also directly contributes to pollution) has resulted in the highly increased demand for sustainable goods. According to the recent research, the shift in demand will impact the production and trade of different commodities like metals, fabrics, clothing and food. For instance, the majority of retailers will start using 100% sustainable cotton. In my opinion, the number of ecologically friendly and zero-waste shops like Lush will rise, as well as the production of environmentally clean items.
Although the scientists and researchers are still working on the best solutions to the complex issues experienced by international business, there are some forecasts and assumptions. As was mentioned before, the infrastructure of transportation systems will be greatly invested and utilized to meet the extreme events and unexpected disasters. But most importantly, due to the degradation of ecology and rising threats, global trade will become more sustainable through the following changes. First of all, the future of trade is proved to be digital. The way I see it is that the vast majority of countries and multinational corporations will use technological innovations not only to increase the volume of production and sales figures, but also to reduce the emission of contaminants and improve the pollution problem. Secondly, Global trade governance will be engaged in the process of protection the environment. New environmental laws and tariffs will come into force. These may include border tax adjustments, trade bans on products damaging the environment and so on. Moreover, the increased sustainability of supply chains will take place. Not only will that help decline the effect on the environment, but also increase the efficiency and trade capacity. As a final point, there will be more rewards such as tax benefits for corporations, which consider the protection of the environment a part of their business model since ecology will become a significant factor determining decisions in International Business.
The given arguments and examples illustrate the complexity of the proposed problem. Today International business appears to be fragile and much exposed to the gradually deteriorating ecology. Unless environmental ministries and the authorities take actions, environmental issues such as climate change, global warming and pollution will keep on wrecking different aspects of global trade. From my perspective, trade policies have to be aligned with environmental aims. Protection of the environment and sustainability are becoming the priorities of major multinational businesses like IKEA, Adobe and more. Global corporations will concentrate on producing and trading sustainable goods and decreasing the negative impact on the environment. I personally believe, that digitalization and technology combined with specific tariffs and laws will become the most powerful tools in the process of achieving sustainable world.