Many of you probably remember The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, Marc Levinson’s splendid book on the most mundane of inventions – the stackable, standardized steel container built to move goods seamlessly among factories and between manufacturers and consumers. Levinson, an economist turned journalist (which warms my heart), is back at it again, this time with Outside the Box: How Globalization Changed from Moving Stuff to Spreading Ideas.* Here, we excerpt the chapter on the uneasy relationship between global economic integration and the environment – how low-cost shipping and reduced regulation of trade have complicated the task of keeping the planet healthy in the teeth of climate change and lesser-known assaults on sustainability.
— Peter Passell
Published October 23, 2020
*Princeton University Press 2020.
All rights reserved.
On May 31, 2019, the Bavaria, a 16-year-old container ship previously known as the APL Panama, registered in Liberia and run by a Singaporean company on behalf of the Danish ship line Maersk, left Subic Bay in the Philippines bound for Taiwan, carrying 69 containers of household garbage and obsolete electronics that originated in Canada. A private company had exported the refuse to the Philippines, ostensibly for recycling but in fact for cheap disposal. After impounding the containers for more than five years, the Filipino government saw fit to send them back where they had come from. Following a change of ships in Taiwan, the repatriated waste reached Vancouver on June 29, where it was burned to generate electricity.
The voluminous trade in trash, from plastic soft-drink bottles to hazardous medical waste, did not exist in the pre-container era: shipping recycled newspapers 5,000 miles was not worth the cost. Its prominence in the 2010s was just one manifestation of a world in which distance and borders mattered less than before. Demand to export beef, soybeans and palm oil brought the loss of forests and marshlands, contributing to the extinction of entire plant and animal species. Freer trade tempted manufacturers to flee countries with tight environmental controls for places where rules against dumping toxic chemicals and polluting the water were less likely to be enforced. Particulates from Indonesian coal burned in Pakistani power plants blew across Asia’s borders. The explosive growth of long-distance trade made almost every economy more transport-intensive, increasing the use of petroleum-based fuels and thereby contributing to the ceaseless rise in the concentration of greenhouse gases that were changing the earth’s climate.
Blaming globalization for environmental degradation is morally fraught. Increased foreign trade, foreign investment and foreign lending raised the incomes of billions of people. While globalization left many behind and drove others to migrate in search of work and safety, it lifted many more out of poverty. Apartment towers and multistory shopping malls, each requiring the production and transportation of concrete, glass, steel beams and copper pipes, sprouted in former swamps and rice paddies around the world. Roughly 3.5 billion people had electricity in their homes in the late 1980s; by 2017, that figure reached 6.5 billion – a task accomplished by hastily constructing hundreds of power plants, many of them importing the dirtiest of all fuels, coal. Television sets and airplane trips came within reach of a rapidly expanding middle class, and global consumption of beef, once a luxury in many parts of the world, increased by half between 1990 and 2017. These achievements cannot be dismissed out of hand.
Yet the fact that more people enjoyed greater material wealth than ever before was undeniably associated with a greater burden on the environment. It was true, as an OECD report acknowledged memorably, that “globalization is often an ally of the chainsaw.” Countries whose primitive economies were transformed overnight lacked the scientific expertise and bureaucratic infrastructure to oversee the factories, waste disposal sites and industrial-scale plantations springing up within their borders. In China’s rush to expand manufacturing, factories were permitted to dump contaminated water into sewers or nearby rivers with little oversight, to the point that many rivers were unfit to drink from.
The Global Trade in Pollution
The risk that a more integrated world might injure the environment was evident long before “globalization” was applied to the economy. In 1947, the United Nations Educational, Scientific and Cultural Organization (UNESCO), a new branch of the two-yearold United Nations, decided to convene international meetings on conservation and natural resources. The first one occurred a year later, when delegates from 33 countries, representing private organizations as well as governments, met in Fontainebleau, south of Paris, to establish the International Union for the Protection of Nature.
At the time, no country had an environment ministry. California had just created the first modern air pollution control program, in Los Angeles. London’s “killer smog,” which would be blamed for 4,000 deaths and eventually lead Parliament to approve the Clean Air Act, was still four years in the future, and the U.S. Congress would not pass its first environmental law, the Air Pollution Control Act, until 1955. The conference in Fontainebleau, however, did not discuss pollution control at all. Rather, the concern was that trade and economic development would threaten flora and fauna, particularly in European colonies in Africa. Creating nature reserves and protecting big game were the main topics of interest.
New environmental regulations focused first on the most visible polluters, factories and power plants that dumped untreated effluent into rivers and vented noxious gases into the air.
Through the 1960s and 1970s, a series of influential books – including Rachel Carson’s Silent Spring, documenting the effects of the insecticide DDT on fish, birds and humans; The Population Bomb, a 1968 bestseller in which the Stanford University biologist Paul Ehrlich warned that overpopulation was bringing unavoidable starvation; The Limits to Growth, a 1972 sensation that used novel computer models to forecast “a rather sudden and uncontrollable decline in both population and industrial capacity” due to overconsumption — brought environmental issues front and center. As scientists documented the health risks from air and water pollution and toxic chemicals, demands for a cleaner environment grew louder in wealthy economies, where environmental concerns became more prominent as incomes rose and living conditions improved. Between 1970 and 1972, Canada, the United States, Japan and many countries in Western Europe created national environmental agencies to address pollution problems head on. Their urgency was not shared in developing countries, where the rich world’s newfound concern about overconsumption seemed to imply that poorer countries should not aspire to the living standards of the richer ones.
New environmental regulations focused first on the most visible polluters, factories and power plants that dumped untreated effluent into rivers and vented noxious gases into the air. The principle that polluters, or at least corporate polluters, should pay the full cost of whatever harm they imposed on the public seemed straightforward. But in a world of increasingly free trade, differences in countries’ environmental regulations could have major economic implications. Why pay to install a costly new emissions-control system at a smoke-belching foundry when it would be cheaper to import metal castings from a country without such rules? Why abandon a familiar process for making a chemical, potentially entailing the loss of jobs and profits, when the work could be shifted to a country where widespread poverty and rampant unemployment meant that controlling pollution was not a burning issue?
In 1974, two U.S. scientists discovered that chlorofluorocarbons, chemicals widely used in spray cans and air conditioners, were destroying ozone gas in the stratosphere, where it shields the earth from ultraviolet radiation. Panic ensued, as headlines screamed warnings that ultraviolet rays would cause more skin cancer in humans and mutations in plants and animals.
Several countries soon banned the chemicals, but this was a problem that could not be solved at the national level. International negotiations advanced with unusual speed. In the Montreal Protocol, signed in 1987, countries agreed not only to phase out the production and use of more than 100 chemicals, but also to ban imports containing the chemicals from countries that refused to sign the pact. This was the first case in which the movement toward freer trade, enshrined in the General Agreement on Tariffs and Trade, or GATT [the international agreement that predated the World Trade Organization rules], was trumped by anxieties about the environment – and the first in which developing countries were both induced and required to comply. Manufacturers of refrigerators and air conditioners were forced to develop new ways to keep food cool. They could not evade the new rules by exporting from countries with weak regulations to countries with strong ones.
Sulfur dioxide created by burning coal in power plants and smelters, and then falling to earth in rain, was killing off forests and eliminating fish in thousands of lakes in Canada and the northeastern United States.
Acid rain posed a different sort of crossborder challenge. Through the late 1970s, researchers reported that sulfur dioxide created by burning coal in power plants and smelters, carried northeast on the prevailing winds and then falling to earth in rain, was killing off maple and birch forests and eliminating fish in thousands of lakes in Canada and the northeastern United States. Although emissions from both countries were to blame, the damage in Canada was far greater and the issue far more emotional; on his first foreign trip as U.S. president, Ronald Reagan visited Ottawa in March 1981 to be greeted by protesters holding placards demanding, “Stop Acid Rain.”
A fix was politically complicated: electricity users in Ohio and Indiana faced higher bills if their power plants had to install smoke stack scrubbers to make Canada’s air cleaner, and the powerful U.S. coal industry rejected any responsibility. It took a decade for Canada to work out a domestic emissions-control scheme, for the United States to create a novel program to curb sulfur emissions from power plants, and for the two countries to sign a bilateral air-quality agreement – and longer for acid concentrations to decline enough for fish to repopulate barren lakes.
As international trade expanded, environ-mental concerns increasingly ran against trade policy head on. In 1990, Denmark required not only that beer bottles be recyclable, but that a large share of them actually be re-filled – a stopper for foreign brewers who would have had to ship empty bottles back to distant breweries. A 1991 German law mandated that retailers accept used packaging from customers and return it to manufacturers for recycling. The ecological purpose was sensible enough, but the burden of compliance stood to be much higher for importers selling only small quantities in Germany than for firms emphasizing the German market.
Most emotional was a U.S. ban on imports of tuna from countries, including Mexico, Venezuela, Vanuatu, Panama and Ecuador, that did not take measures to reduce the incidental harm to Pacific dolphins. Just as talks to create a North American free-trade area got under way in early 1991, Mexico asked the GATT to determine whether the U.S. Marine Mammal Act, which authorized the ban, improperly interfered with trade. The Mexican petition unexpectedly introduced a sensitive environmental debate into a trade negotiation.
Mexico, heavily encumbered by its foreign debts, had joined the GATT only four years earlier. It was cautiously opening parts of its economy to foreign investment as it sought to escape its lingering debt crisis. It wanted a North American free-trade agreement to move its economy beyond labor-intensive tasks, such as stitching blue jeans and assembling wire harnesses for cars, and toward more sophisticated manufacturing. U.S. and Canadian companies saw Mexico as an attractive market for exports and a closer source of imports than distant Asia, and the U.S. government hoped Nafta might help stabilize an increasingly shaky neighbor.
The pact, signed in late 1992 [but not yet blessed by the U.S. Congress], met strenuous opposition in the United States, not only from labor unions and some farming interests, but also from environmental groups complaining about air pollution and chemical dumping on the Mexican side of the border. To placate critics, the three countries reached a side agreement to Nafta creating an environmental commission, the first time any international trade agreement included a commitment to improving the environment.
Ironically, Nafta ended up benefiting Mexico’s environment. Many of Mexico’s most pressing environmental problems – the lack of sewage treatment, the dust clouds constantly stirred up by traffic on unpaved city streets – predated Nafta by years, if not decades. The environmental commission offered funds to pave streets and build sewage plants in some places, and foreign companies considering investments in Mexico demanded improvements in others. Imports allowed under Nafta, as well as new plants within Mexico, drove older, smoke-belching factories and cement plants out of business. Motor vehicles as modern as those assembled in Canada and the United States supplanted the antiquated and highly polluting fleets for which Mexico was known. Perhaps most importantly, domestic environmental groups finally gained political influence in parts of the country, demanding action against deforestation, creation of new nature reserves, and tougher environmental laws.
The Main Event
Climate change poses a very different chal-lenge to globalization than more traditional forms of pollution. Unlike the environmental issues raised by European recycling policies and Nafta negotiations, the rising concentra-tions of greenhouse gases in the atmosphere, due principally to the burning of fossil fuels, were inherently a global problem. In most countries, international trade was by no means the main source: by one estimate, emissions from producing and transporting imports and exports accounted for less than one-fourth of production-related emissions in the early 2000s, and an even smaller share of total emissions. By the calculations of Joseph Shapiro, an American economist, international trade added about 5 percent to the world’s emissions of greenhouse gases, increasing global emissions of carbon dioxide by 1.7 gigatons a year.
In 1997, 37 countries, mainly in Europe, signed the Kyoto Protocol, an agreement to reduce their greenhouse-gas emissions. While many of those countries seemed to be living up to their promises in the early 21st century, their downward-sloping trend lines were an illusion. There were genuine improvements – heating systems became more fuel efficient and wind and solar power took market share from coal – but global value chains served to disguise the fact that many countries were restraining their emissions of carbon dioxide, methane and other gases by stepping up imports from countries that had done little to reduce emissions.
Moreover, when tariff rates are adjusted for the greenhouse-gas emissions involved in producing specific goods, many countries charge less on dirtier imports than cleaner ones, effectively encouraging dirty industries to move offshore. Closing smelters and steel plants and buying exports from poor countries instead flattered rich countries’ statistics, but it did not bring down the quantity of greenhouse gases entering the atmosphere. Overall emissions from exports grew 4.3 percent per year from 1990 to 2008, three times as fast as the world’s population. Trade allowed the wealthy economies to push their emissions out of sight.
Almost unanimously, economists favor using taxes to deter greenhouse-gas emissions: economic theory teaches that a tax on emissions would give factories and power plants financial reason to emit less. Taxing individual drivers and farmers is politically treacherous, but the European Union, a handful of U.S. states and several Canadian provinces attempted to force power plants and factories to pay for each ton of carbon dioxide coming out of their smokestacks.
In a globalized economy, though, taxing emissions is not so simple. A tax high enough to induce a plant to install more fuel-efficient equipment would raise prices for customers, who might choose instead to import from countries where greenhouse-gas emissions are not taxed. Transporting cement over long distances is costly relative to the value of the product, so taxing a cement plant’s emissions has little effect on trade. But electricity is a major cost in making aluminum, and a tax that makes electricity dearer might well tip the balance in favor of imported ingots and billets.
Trade in manufactured goods is only one source of emissions related to globalization. By the 2010s, more than one-fifth of the calories produced by farmers were traded each year, much of it in the form of oils pressed from soybeans, corn, cotton and other crops.
While the largest share of agricultural exports occurred within the European Union, Chile shipped large volumes of cherries (166,000 tons in the 2018-19 season) and plums (77,000 tons) to China, and Mexico discovered burgeoning markets for avocados in Canada and Japan. Alaskan fish distributors flew freshly caught Dungeness crabs to China, where the meat was extracted from the shells and packed for U.S. customers, and Boeing 747s laden with fish caught off Namibia made nonstop runs to Zaragoza, Spain, where fish processor Caladero filleted them for sale in Spanish supermarkets.
While the largest share of agricultural exports occurred within the European Union, Chile shipped large volumes of cherries (166,000 tons in the 2018-19 season) and plums (77,000 tons) to China.
The large-scale cutting of forests to create palm-oil plantations and cattle ranches was a major source of greenhouse gases, and moving food so many miles added to emissions. Worries about climate change meshed with decades-old critiques that large firms and long-distance freight shipments were destroying self-sufficient local economies. A 1994 report by the Sustainable Agriculture, Food and Environment (SAFE) Alliance, a British group, gave consumers a way to measure the true cost of imported food by introducing the concept of “food miles.” Its claim was that long-distance shipments of food wasted both energy and food, benefiting big supermarket chains but increasing pollution. Minimizing the number of miles food traveled by purchasing from local farms, it contended, was better for the environment than purchasing imports.
“Food-miles” struck a chord with the spreading anti-globalization movement. The assertion that food imports were artificially cheap because consumers did not have to pay the full cost of the environmental harm they caused, including greenhouse-gas emissions, was accurate. Yet the underlying claim that buying locally produced food was better for the environment was not necessarily true. Because British farmers typically bought factory- made food concentrates for their livestock rather than feeding them entirely on grass, a ton of lamb raised in Britain embodied four times the greenhouse-gas emissions of lamb imported from New Zealand, while milk powder shipped from New Zealand resulted in less than half the emissions of the British domestic product.
Similarly, a British government study found that importing organic wheat by sea from the United States led to much less air pollution and lower greenhouse-gas emissions than growing the same wheat in Great Britain. Reducing food-miles would not necessarily reduce greenhouse-gas emissions, the study pointed out, because small, local food producers might be less energy efficient than larger ones and might make the distribution system less energy efficient as well. So far as the environment was concerned, buying global sometimes turned out to be better.
As wine drinkers know well, the dearest French wines bear the label Mis en bouteille au Château. That etiquette, promising that the wine was bottled on the estate where all the grapes used to make it were grown and fermented, supposedly ensures the purest, highest-quality libation. Oenophiles may dispute the importance of the label. But one thing is not in dispute: transporting estatebottled wine means roughly 40 percent more greenhouse-gas emissions than if the wine is moved in a stainless-steel tank and bottled near where it will be consumed.
Paying the Freight
Reducing emissions from freight transportation became a priority in the second decade of the 21st century. Transportation of all sorts accounted for around one-tenth of all greenhouse- gas emissions in 2007 and a large share of other types of air pollution. Truck engines were the main source, but international ocean shipping was responsible for about 3 percent of global emissions and freight carried aboard international flights for another percentage point or two.
The European Union required airlines to purchase greenhouse-gas emissions permits for all flights taking off from or landing within its borders, other countries objected loudly that this violated international agreements.
Freight transportation emitted significantly less than power generation and manufacturing, but with an important difference. Whereas power plants and highly polluting factories are fixed in place, difficult to disguise and clearly subject to the jurisdiction of a particular government, ships and planes are often owned by residents of one country, registered in another and following routes between countries unconnected to the owner or the place of registry. They were not easily regulated: in 2012, when the European Union required airlines to purchase greenhouse-gas emissions permits for all flights taking off from or landing within its borders, other countries objected loudly that this violated international agreements, and the requirement was applied only to flights entirely within the European Union.
Air freight flourished in the Third Globalization [from the 1990s to the present]. The best measure, the number of ton-kilometers, was five times as high in 2017 as it had been in 1987, mainly because air freight had become much cheaper. Adjusted for general price inflation, the average cost of air freight declined more than 2 percent annually during the late 1990s and early 2000s. Measured by volume, only a tiny fraction of world trade moved by air in 2017. Measured by value, though, planes carried more than one-third of exports and imports, from U.S. semiconductors headed to Shanghai to Kenyan roses destined for Amsterdam. But while newer jets burned less fuel per ton-kilometer than older ones, the rate of improvement declined over time, and old fuel guzzlers remained in use for decades – often with the seats removed to turn them into freighters. The aviation industry’s rapid growth made reducing greenhouse emissions all but impossible.
The shipping industry faced a similar problem. Most oceangoing vessels burn a thick low-grade oil left over after crude petroleum is refined into gasoline, jet fuel and other high-value products. Because it is stored in the engine’s fuel tanks, or bunkers, ship fuel is often called “bunker fuel.” Bunker fuel tends to be a dirty and noxious product, but it has the virtue of being cheap. With oceangoing vessels spending most of their time in international waters where no country’s pollutioncontrol laws applied, shipowners had no incentive to use cleaner, costlier fuels.
Mauritius Images GMBH/Alamy Stock Photo
Reducing fuel use, however, was in the interest of both shipping lines and their customers, as fuel was generally the largest cost involved in operating a ship. Around 2007, when shipowners embraced slow steaming to save fuel, shippers did not object. At the same time, carriers began acquiring new vessels that burned less fuel per ton-mile than older ones – at least when the ships were full. Shippers, especially those doing business directly with consumers, were under pressure to make their supply chains greener, and they could rightly boast that their average greenhousegas emissions from transporting each container or each ton of wheat were coming down. Whether total emissions from ocean shipping were declining, though, was a matter of some dispute, as the total volume of international freight continued to increase.
The world’s shipping industry is loosely overseen by the International Maritime Organization, a branch of the United Nations. Operating by consensus, the IMO does not move quickly. But as individual countries adopted environmental rules that would affect international shipping, it felt rising pressure to act. In 2005, new IMO rules limited ships’ nitrogen oxide emissions and set a limit on allowable sulfur content in vessel fuels to control emissions of sulfur dioxide, the chemical responsible for acid rain. Six years later, the IMO mandated energy-efficient designs for new ships, and in 2018 it announced a strategy to cut greenhouse-gas emissions to half the 2008 level by 2050.
None of these initiatives had immediate consequences, but all of them promised to raise the cost of shipping over time. Meeting the IMO’s requirement that an estimated 110,000 ships burn only low-sulfur fuel starting in 2020 required refineries to retool, adding a projected $60 billion per year to the cost of transporting freight.
By the second decade of the 21st century, environmental stress was casting a shadow over globalization. Although individual countries’ environmental policies were erratic, the movement toward tighter environmental controls was unmistakable.
Higher-income countries acted to phase out coal-fired power plants, subsidize battery- powered cars and reduce the amount of waste sent to incinerators or landfill. Developing countries that had only recently turned a blind eye to environmental concerns found their newly prosperous citizens no longer willing to accept dirty air and dirty water as unavoidable costs of economic growth. China, Indonesia, Malaysia, Thailand and Vietnam all cracked down on imports of rich-country garbage, and even poorer countries like Kenya and Tanzania prohibited the ubiquitous plastic bags that clogged waterways and hung from tree branches. Higher taxes on fuels and on greenhouse-gas emissions threatened to make the cost of moving freight an important consideration instead of an afterthought.
Perhaps most consequential of all, investors as well as consumers were demanding to know what firms were doing to minimize their environmental impact. As businesses gave environmental costs greater weight when deciding what to produce and how to transport it, global value chains began to seem riskier and potentially more expensive than corporate bean counters had ever imagined.