"Globalization" is a term that describes the growing interconnectedness of nations through trade and communication. It has both positive and negative effects in social, political and economic terms. It also has an effect on the environment, which is a complex issue with many contributing factors. Mitigating the negative environmental effects of globalization will continue to be an important issue as globalization increases.
The Composition Effect
Liberalization of trade, or the reduction of restrictions, tariffs and other barriers to free trade, has an effect on countries' industry composition, which can have a positive or negative environmental impact. If liberalization has the effect of increasing a nation's industrial or manufacturing segment, the result can be more pollution and more strain on the country's natural resources. On the other hand, if trade liberalization results in a shrinking heavy industry concentration and increasing growth in the services sector, the opposite may be true for that country.
Cheaper Consumer Goods
While greater competition resulting in lower prices, more choice and better service for consumers is often touted as a positive effect of globalization, it has a downside. With more households gaining access to affordable consumer goods, more manufacturing and more intense use of natural resources put strain on the environment in the form of pollution and depletion of resources. Production, transportation and use of consumer goods results in more waste, pollution and fuel use.
Lower Environmental Standards
As countries compete for global trade opportunities, they experience increased pressure to offer lower prices. In areas of the world without sufficient regulatory oversight, dirty industries and practices can thrive by exploiting resources for profit, resulting in a pocket of intense environmental damage. This also gives countries with stricter environmental regulations a comparative disadvantage against countries without stringent oversight, possibly leading countries to relax their own environmental rules to lower the compliance costs on their industries.
Overexploitation of Resources
Competition to meet global demand can result in overexploitation of natural resources. With greater opportunities to export products, many countries have pushed their resources to the limit to maximize production. Without sustainable practices for harvesting, resources can be exploited to the point of no return. Deforestation and overfishing are examples of problems exacerbated by the liberalization of trade around the world.