In remarks on World Environment Day, the Director-General of the World Trade Organization (WTO), Pascal Lamy, pointed out that, “Trade opening has much to contribute in the fight against climate change and to the protection of the environment.”
Indeed, the most practical improvements in energy efficiency and protecting the environment over the past decades haven’t stemmed from government regulatory mandates. As shown in the analysis of the Index of Economic Freedom, the most progress has been driven by advances in freer trade and economic freedom. These unleash greater economic opportunity and prosperity, generating a virtuous cycle of investment, innovation, and dynamic economic growth. Echoing the same message, the WTO chief further noted:
The entire world is well aware of the environmental dangers posed to our planet. But the ability of governments to respond to these dangers is tied closely to the resources at their disposal. Countries which have had success in alleviating poverty and raising living standards tend to be more adept at creating the conditions for a cleaner environment.
Policy efforts aimed at imposing stricter environmental standards through a national or global regulatory body run great risk of being not only fruitless, but also counterproductive. They undercut the economic growth and efficiency indispensable to effective efforts to protect the environment. Such regulations are likely to be little more that feel-good actions! The fundamental flaw of those favoring new government directives is the fallacy that there must be a trade-off between economic growth and environmental protection. They seem to think that to get more of one, you have to have less of the other. The truth is just the opposite: to get more environmental protection you need more growth, not less.
It is encouraging that many Americans see that truth. As a March 2010 Gallup survey reveals, more Americans believe that economic growth should take priority over environmental protection when the two goals collides, with fewer willing to support environmental measures that may have a negative economic impact!