The importance of sustainability in international trade
Businesses who trade overseas have a responsibility to be mindful of their expanding global footprint and environmental impact. Now, more than ever, as the climate change conversation continues to grow, to be sustainable, companies must try to minimise their carbon emissions, reduce waste, and conserve natural resources in their business practices.
Many consumers are also concerned with the sustainability of the products and services they purchase, so it makes good business sense for companies to try to be as environmentally sustainable as possible, to increase their market share and be competitive.
In this blog, we’ll explore what companies can do to be more sustainable, outline the World Trade Organisation’s sustainability goals, and discuss how greener trade policies can address climate change issues.
What is international trade policy?
International trade policy is a government’s rules and regulations which guide and control how trade is done with foreign countries. Each country sets out its own international trade policy, so each country has the means to adopt and implement environmentally sustainable goals for their domestic producers who import and export goods.
What can companies do to be more sustainable?
There are many ways companies can adopt more sustainable practices into the way they do business. Some of these include:
- renewable energy use
- eco-friendly packaging
- responsible supply chain management
- mitigate environmental harm
- sustainable transportation
- support initiatives preserving biodiversity and ecosystems.
The World Trade Organization’s sustainability goals
The 2030 Agenda for Sustainable Development was adopted by all United Nations members in 2015. The Agenda created 17 world Sustainable Development Goals (SDGs) which put emphasis on the role that trade plays in promoting sustainable development. The World Trade Organization (WTO) is central to achieving this Agenda. Below are the SDGs it is focusing on.
No Poverty
Evidence suggests that good trade policy initiatives can positively impact sustainable poverty reduction. Global trade can higher living standards through greater productivity, increased competition and better prices in the marketplace.
Zero Hunger
Subsidies can cause distortions in agricultural markets. Eliminating these leads to a more competitive market, which helps farmers and consumers and contributes to food security globally.
Good Health and Well-being
A WTO agreement makes it easier for developing countries to have a secure legal pathway to affordable medicines in line with this goal.
Gender Equality
Export sector jobs tend to have better pay and conditions, while providing jobs for women in developing countries. In this way, trade creates opportunities for women’s employment and economic development.
Decent Work and Economic Growth
Sustainable development relies on trade-led inclusive economic growth which can enhance a country’s income-generating capacity.
Industry, Innovation and Infrastructure
Open markets are key for trade and investments between developing and developed countries. This allows for the transfer of technologies, resulting in more industrialisation globally.
Reduced Inequalities
Changes in development globally have been decreasing inequality between countries. WTO tries to reduce the impact of existing inequalities by offering flexibility and a focus on capacity constraints for developing countries.
Life Below Water
WTO members have been negotiating global rules to curb harmful fisheries and work is continuing on issues where further technical work is needed.
Partnerships for the Goals
The targets under this goal call for:
- Countries to promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system
- The increase of developing countries’ exports and doubling the share of exports of least-developed countries (LDCs)
- The implementation of duty-free and quota-free market access for LDCs with transparent and simple rules of origin for exported goods.
The WTO is the key channel for delivering these goals.
Are global value chains (GVCs) sustainable?
GVCs are when the production of products happens through multiple countries with manufacturing and assembly happening on a global production line. Each step of the process, and each country involved, adds value to the end product.
A research article published in the Journal of International Management explored the link between international business sustainability and GVCs. They found that ‘GVCs, under world-systems theory, recognised the social relations of international actors within a chain. This resulted in the emergence of sustainability as a significant theme within the GVC analysis, including the social, environmental, and governance dimensions of value creation processes.
How do trade agreements between countries impact global economic growth in developing countries?
Being able to trade internationally enables countries to expand their markets and access goods and services which may not have been available domestically. Expanding products into international markets makes the market more competitive, resulting in more competitive pricing and cheaper products for the consumer.
How greener trade policies can address climate change issues
International trade promotes economic efficiency by expanding job opportunities, knowledge sharing, and goods and services into other countries. It may also be able to disseminate green technologies and expertise by capitalising on the connections between countries. Transitioning to a greener world is only possible by applying climate goals to global trade rules, otherwise climate issues could shift between countries.
Trading countries can use forums like the WTO to promote international environmental cooperation, and can also seek green bilateral and multilateral trade agreements, as well as take unilateral steps. However, in order for it to work, all countries need to be mutually agreed and committed to climate issues.
To punish the countries who don’t commit to addressing climate issues, importing countries are able to implement environmental tariffs (or eco-tariffs). This is a tax on products which are imported from countries with inadequate environmental pollution controls.
Become an expert in trade sustainability strategy
There is a high demand for professionals who can improve global trade policies and practices. They would focus on environmental issues and create an action plan to promote sustainability in international trade.
On the University of York’s 100% MPA Public Policy and Management, you will have the opportunity to create a positive difference in carbon reduction, equipping you with the skills to manage stakeholders across industries.
Whether your goals are in environmental policy, economic sustainability issues, sustainable procurement, or working in a company committed to continuous improvement in reducing its carbon footprint, you will develop the skills and knowledge to succeed in this sector.