Recent Research on Environmental, Social and Economic Impacts Embodied in International Trade

2.2.1 Scope and Scale of Embodied Impacts

Numerous studies have been conducted in the last few years to shed light on the question how trade influences the use and distribution of natural, social and economic capital. Table 8.1 summarises some high-level results, in particular the fraction of total global impact that can be attributed to international trade as well as the major bilateral embodied trade flows. Note that these values depend on the number of countries or regions used in the various calculation models. As a general rule, the finer the spatial resolution of the model, the higher the international trade flows, and the lower the intra-regional trade movements. Where possible, individual countries were identified as main traders in Table 8.1.

At least a fifth and up to 64 % of global environmental impacts can be linked to trade (for all references refer to Table 8.1). Greenhouse gas emissions are the beststudied indicator. About one quarter of all global CO2 emissions are linked to the production of goods and services that are exported and used to satisfy demand in countries other than the country where the emissions occur. One study suggests that the fraction of CO2 embodied in trade could be as high as a third of global emissions. And if the trade of fossil fuels is taken into account, then the amount of 'dislocated' CO2 emissions from the point of extraction to the point of final consumption is 37 % or more than 10 Gt of CO2. According to Meng et al. (2015), the median export share of a country's territorial emissions was 29 % in 2007, and emissions embodied in imports made up almost half of the carbon footprints of countries (median 49 %). The largest bilateral flows of embodied CO2 emissions with well over 1 Gt of CO2 are from China to the USA. This finding is not surprising given the large volumes of exports from China and imports to the USA and the fact that China's production system is very carbon intensive (Minx et al. 2011). The EU is also a large importer of GHG emissions from Asia (0.8 Gt CO2e). When accounting for international CO2 emissions embodied in investments (instead of total final demand), China also emerges as the main exporter of investment-embodied emissions and Western Europe and North America as the main importers.

Table 8.1 Global studies quantifying environmental, social and economic impacts embodied in international trade

Table 8.1 (continued)

Table 8.1 (continued)

aSame year as fraction unless otherwise stated

bn.p. not provided

cEEBT emissions embodied in bilateral trade

Virtual water embodied in trade makes up between 22 and 30 % of total global water use, with the USA taking on a dual role of both largest exporter and importer of virtual water (though some studies suggest that China is the main exporter). When adjusting water use numbers with a factor for its scarcity in regions and countries of extraction, almost one third (32 %) of this 'scarce water' is associated with trade. India is the largest exporter of scarce water, the USA its largest importer.

Comparable numbers for the share of total impact embodied in trade are reported for other environmental indicators: 20–24 % for land use, 30 % for threatened species and 35 % for energy. Even higher is the share for raw materials: 41 % of all raw materials (biomass, fossil fuels, construction materials, minerals and metal ores) are extracted worldwide only in order to enable the export of goods and services from the country of extraction. And for metal ores the majority of extraction occurs due to export activities: 62 % of the global iron ore extraction and 64 % of the global bauxite mined are associated with trade. On average, only about one third of all raw materials actually leave the country of origin on a cargo ship, truck or plane. The rest are process wastes and auxiliary material flows that, whilst remaining near extraction sites, can still be attributed to the material footprint of other countries that import goods and services for their final consumption.

For most environmental impacts the direction of burden shifting (see Sect. 2.1) is from developed countries to developing countries, but not for all. An indirect threat to species through trade is experienced in countries such as Papua New Guinea, Madagascar or Indonesia, whereas air pollution and GHG emissions embodied in exports occur mostly in China. Russia exports embodied energy and emissions from traded fossil fuels as well as land. For the virtual use of land through trade, there are mixed results, depending on the type of land and on the characteristics of the model used for the analysis. In addition to Russia as the largest exporter of embodied land, China has been identified as exporting the most biologically productive land area and the USA as exporting the most cropland. Resource-rich countries that physically export large quantities of raw materials are also amongst the top exporters of embodied materials, e.g. India for biomass, Russia for fossil fuels, Chile for metal ores in general and more specifically Brazil for iron ore and Australia for bauxite. China virtually exports 39 % of all construction materials extracted worldwide (5.2 Gt of 13.3 Gt). Again, most of this material is not physically shipped abroad but used domestically in China to build up infrastructure for a highly export-oriented economy.

A strong driver of globalisation has been the move of production to places where wages and therefore total production costs are relatively low (Timmer et al. 2014). A large workforce in developing low-wage countries is employed to manufacture goods for exports, mostly to the developed world. Often working conditions are poor, and workers have low skills or are exposed to health and safety hazards. Sometimes children and other vulnerable persons are forced to work. Women often experience more detrimental conditions than men.

Industrial ecology research entered a new field when several studies were published in 2014 that investigated the 'labour footprint' of nations and the role of trade in employment conditions of exporting countries. On average, about 16–18 % of all labour in the world is embodied in trade (between seven world regions – the numbers would be higher when considering trade between all countries). Some forms of damaging labour conditions seem to be supported by trade, e.g. 20 % of all hazardous child labour is for exports. And 38 % of all work done by women became embodied in international trade. Asia is the largest exporting region of all forms of (bad) labour, except for child labour and hazardous child labour for which Africa is the largest exporter (Simas et al. 2014).

Wages on the other hand are highest in the developed world, and therefore trade flows of embodied wages take different paths to those for labour. The highest flows of wages embodied in exports are between developed countries, mostly from the USA to Japan (and backwards), Canada and Europe, but also to China.

The flow of money in trade has been studied extensively for a long time, but recently researchers have used newly available multi-region input-output (MRIO) models to study specific economic aspects of trade, such as fragmentation or value added (VA) in trade. Trade statistics are normally based on gross export values, thus double counting the VA along global supply/value chains (Kelly and La Cava 2013). Interest has therefore grown in VA as a 'trade commodity' that can become embodied in international trade flows, and methodological frameworks have been developed accordingly (e.g. Koopman et al. 2014). One study found that the foreign VA content of exports from Luxembourg was 61 % in 2011 (Foster-McGregor and Stehrer 2013). Interestingly, there seems to be a trend towards value being added by capital and high-skilled labour and away from less-skilled labour (Timmer et al. 2014). The capital share in the VA of emerging economies is rising, whilst the share of low-skilled labour in their VA is declining.

Meng et al. (2015) synchronously evaluate VA and CO2 emissions in global trade. Their detailed analysis confirms the increasing fragmentation of international trade. They find that more than half (ca. 60 %) of China's emissions attributable to foreign final demand are embodied in the trade of intermediate goods (ca. 40 % of export emissions are embodied in the trade of final goods). Whether a country's emissions become embodied in the trade of final or intermediate goods depends on its position in the global value chain. Meng et al. (2015) demonstrate how CO2 emissions from Poland's metal industry are associated with final demand in the USA: 90 % of these emissions are embodied in intermediate good trade (roughly half of which are traded directly between Poland and the USA, and the other half is traded by way of third countries).

2.2.2 Trends of Impacts Embodied in Trade

The results in Table 8.1 show clearly that trade is associated with a significant dislocation of environmental, social and economic factors, thus further separating impacts of production (both negative and positive) in one place from consumption elsewhere. Forty per cent of the national carbon footprint of the UK is exerted abroad (Hertwich and Peters 2009) and 75 % of its national water footprint (Hoekstra and Mekonnen 2012). The numbers presented in Table 8.1 are the latest available, but there has been a strongly increasing trend for the last few decades. For example:

• Land for the export production of crops grew rapidly by +2.1 % per year between 1986 and 2009 (Kastner et al. 2014a). At the same time, land supplying crops for direct domestic use remained almost unchanged.

• Flows of materials embodied in international trade are reported to have increased by 62 % between 1997 and 2007 (Giljum et al. 2014) and by 123 % between

1990 and 2008 (Wiedmann et al. 2015).

• Global trade in embodied iron ore has grown faster than its extraction, by a factor of 2.7 between 1990 and 2008 (Wiedmann et al. 2014). Trade of embodied bauxite has grown by a factor of 2.4.

• From 1995 to 2007 total global CO2 emissions from production have increased by 32 %, whereas global emissions embodied in trade have increased by 80 % in the same period (from 4.6 Gt or 24 % of global production emissions to 8.3 Gt or 33 %) (Xu and Dietzenbacher 2014).

• In the most comprehensive study, Arto et al. 2012 present the trend of impacts embodied in trade from 1995 to 2008 for the following indicators: land +3.0 Mkm2 (+22 %); raw materials +7.3 Gt (+80 %); blue, green and grey water +1.2 PL (+88 %); acid emissions +734 kt H+e (+54 %); GHG emissions +4.7 Gt CO2e (+83 %); and ozone precursors emissions +55.3 Mt NMVOCe (+103 %).

These examples show impressively how rapidly impacts associated with trade have grown in little more than 20 years, given that total global impacts have grown much slower (land +2 %, raw materials +43 %, water +37 %, acid emissions +12 %, GHG emissions +29 %, ozone precursors emissions +11 %; Arto et al. 2012).