Will free trade help the environment after Brexit?
As it happens, the record of the EU when it comes to environmental matters is not good. It is often suggested that the Common Agricultural Policy, an important protectionist measure that supports EU farmers, encourages farming practices that damage the environment, though its explicit objectives are designed to promote sustainability. And although there have been improvements in recent years, the first 20 years of the EU’s Common Fisheries Policy was a disaster for fish stocks. An indication of the degree of waste is given by the fact that, in 2011, in some EU fisheries, as much as 70 per cent of caught fish were discarded because of the perverse incentives of the quota system. More market-based systems of fish conservation, such as that used in Iceland, produce much better environmental outcomes. The EU has also not been notably successful at reducing carbon emissions and goes about the job in a way that imposes much higher costs on the economy than is necessary. In addition, the EU’s insistence on banning genetically modified crops – an issue on which it is now intending to give a little more sovereignty to member countries – does it no credit at all.
Indeed, we should not expect the EU to be effective in promoting the environment. One reason for that is that there are very few environmental problems that are EU-wide challenges. There are global environmental problems (such as climate change) and there are local and national problems. Sometimes there are transnational problems, but these are best handled by specific agreements between affected countries, as happens with the Convention on the Protection of the Rhine.
When the Nobel Prize Winner Elinor Ostrom, whose life’s work was in the area of environmental conservation, was asked about the EU Common Fisheries Policy in one of her last public lectures she replied:
“Well, it is rather tragic because the European fisheries rules go all the way from the Mediterranean to the Baltic. And it’s one set of rules for all that. The Baltic is an entirely different ecological system and it just doesn’t make sense.”
The indications from the UK government are that its approach to fisheries upon leaving the EU will not be a big improvement on the status quo. However, the possibility for reforms that will be really effective in conserving fish stocks is now open. Local solutions that are appropriate to each country – or for that matter small coastal areas within countries – are more likely to be successful than a one-size-fits-all policy determined in Brussels.
So, the direct effects of Brexit could be positive for the environment. Certainly, the UK will be removed from some EU environmental protection mechanisms that have caused more harm than good. More market-based and more efficient environmental policies can also be followed that will lead to better outcomes at lower costs.
But, what about the indirect effects? It is the wish of many that the UK moves from being a Europe-centered to a global trading nation. Currently, 70 per cent of UK agricultural imports are from the EU. This arises because the EU is a customs union and not a free trade area. It imposes tariffs and other restrictions on the import of food, as well as on other goods and services. The ways in which the EU does this is so complex that it is difficult to quantify the effect in a single statistic. However, in the last 10 years, the price of sugar in the EU has often been 75 per cent higher than the world price as imports have been kept out. This harms EU food processers as well as producers such as Brazil, not to mention EU consumers. Processed foods often face much higher tariffs than agricultural products, thus preventing poor countries going up the value chain and exporting processed coffee and chocolate. Regulations also stop the import of cheaper food from other countries. For 20 years, the EU has banned the import of American chickens sprayed with a diluted chlorine solution, despite no evidence of harm to human health.
If Brexit were to lead Britain to take a free-trade position, our food sources might globalise. We might be able to import chickens from the U.S., chocolate bars from Africa, more sugar from Brazil, and more GM crops from everywhere.
At this point, the environmentalist movement becomes concerned. They cite “food-miles” as damaging the environment. Much better, it is argued, to buy local food and reduce the carbon emissions from the transport of food.
This is nonsense. Adam Smith famously wrote:
“The natural advantages which one country has over another in producing particular commodities are sometimes so great that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines merely to encourage the making of claret and burgundy in Scotland?”
Of course, Smith was not talking about carbon emissions, but he could have been. The environmental resources that are necessary to grow crops and raise animals in parts of the world which do not have intrinsically suitable conditions can be enormous. Furthermore, shipping raw materials and then processing in another country can be much more expensive than processing in the country where the raw material is grown – just think of the air miles involved when somebody imports 30 oranges to make his own fruit juice at home, as compared with importing a compact and conveniently cube-shaped carton of processed juice.
Free trade and private property are the linchpins of such a system.
As well as adopting free trade, it is essential that the adoption of sensible, market-oriented environmental policies is encouraged. In particular, energy subsidies in those many countries in which they still exist should be eliminated and water rights should be privately owned where possible with farmers being charged for water use so as not to encourage thirsty crops in areas of water shortage. Offenders here range from India to Kenya to California. But, this is a separate argument and should not be conflated with the general case for free trade.
If we want to reduce the strain on the environment, we should grow and process food where it can be produced most efficiently, after allowing for transport costs. If we want to ensure that this happens, we should remove tariffs and other trade restrictions. I look forward one day to eating a U.S. chicken cleaned with chlorinated water – just as I drink water from the tap each day which is chlorinated to ensure that it meets EU drinking water regulations.
We cannot say for sure that Brexit followed by freer trade will lead to better stewardship of the environment. However, we can say that many of the fears that are raised are simply myths. And, certainly, the surest way to encourage people to be good stewards of creation is to have a free economy combined with good institutional mechanisms for ensuring that people take responsibility for the environmental resources they consume. Free trade and private property are the linchpins of such a system.
This article was first published by the Acton Institute.