COMMENTARY
Economic specialization versus ecological diversification: the
trade policy implications of taking the ecosystem approach
seriously
Fred P. Gale *
School of Go6ernment,Uni6ersity of Tasmania,Tasmania,7250 Australia Received 19 January 1999; accepted 23 March 2000
Abstract
The author contrasts the economic principle of specialization found in trade theory with the ecological principle of diversification that underlies the ecosystem approach to natural resource use. He argues that current ecosystem decline is a consequence of the over-extension of the principle of specialization from the factory setting to nature. When the specialization principle is applied wholeheartedly to natural systems to speed up their delivery of desired commercial products it leads to ecosystem simplification, loss of integrity and stress. This occurs, for example, in modern approaches to forest management, when clearcutting and replanting with genetically modified seeds occurs with heavy inputs of fertilizers, herbicides and pesticides. What is required is a re-balancing of the application of the principle of specialization with the principle of diversification, as occurs when forests are managed according to an ecosystem(-based) approach. This re-balancing occurs at the level of production, however, not at the level of trade. Consequently, the focus of environmental reform must be production policy, not trade policy. © 2000 Elsevier Science B.V. All rights reserved.
Keywords:Trade; Specialization; Diversification; Economics; Ecology; Production
www.elsevier.com/locate/ecolecon
1. Introduction
From a historical perspective, the trade and environment debate is relatively recent. Although some work was done in the 1970s (Baumol and Oates, 1977), the flurry of recent activity received its major impetus from the simultaneous
negotia-tion of two major internanegotia-tional trade agreements: the North American Free Trade Agreement (NAFTA) between Canada, Mexico and the USA, and the Uruguay Round of the General Agreement on Tariffs and Trade, the latter result-ing in the formation of the World Trade Organi-zation (WTO). The background, negotiation and implementation of these agreements stimulated a heated debate that shows every indication of
esca-* Tel.: +61-3-6226-2329; fax:+61-3-6224-0973.
lating between those who view freer trade as an essential condition of sustainable development and those who regard it as that concept’s ultimate sell-out (Esty, 1994; Anderson et al., 1995; Gale, 1997, 2000).
Trade promoters, backed by the discipline of neo-classical economics, have pushed for freer trade to stimulate economic growth and develop-ment. They fear that the environment will be used as a new, powerful rationale to justify another round of ‘green’ protectionism, strangling the globalization process and recreating the sub-opti-mal, nationalized, closed trading systems of the past. Protectionist policies are fundamentally wrong headed, they argue, because trade is a second-best policy to achieve environmental goals, and cannot substitute for needed domestic measures (Bhagwati, 1993).
Conversely, environmentalists are deeply con-cerned about the impact of trade on natural ecosystems and its potential to accelerate biodi-versity loss through habitat destruction and degradation. Since the purpose of open trade arrangements is to promote economic growth and because current growth patterns are damaging global, national and local ecosystems, environ-mentalists argue that growth is not desirable and that the policies that promote it should be op-posed (Daly, 1993). The environmental movement is split, however, over what their precise objec-tives should be with regard to global trade ar-rangements. Some advocate a policy of national self-sufficiency (a form of eco-autarky) that envis-ages the production within a country’s own bor-ders of the vast majority of a society’s (much reduced consumption of) goods and services (Daly and Cobb, 1994). Others argue for better regulation of international trade relations via such policies as the internationalization of the polluter pays principle; the use of full-cost accounting, eco-certification and labelling, and life-cycle anal-ysis; and the admission of process and production methods to discriminate between otherwise like products (Esty, 1994; Repetto, 1994).
In this paper, I do not examine the trade and environment debate trade per se. Its purpose in-stead is to elucidate the tension that exists be-tween two principles: one central to ecology; the
other to economics. My goal is to draw attention to a fundamental tension between the economic principle of specialization that lies at the heart of trade theory and the ecological principle of diver-sification embedded in the ecosystem approach to nature. I argue that a central requirement in making international and national trade relations sustainable lies in reconciling these two principles so that the motor of economic growth — special-ization — drives the engine of development at a speed and in a direction compatible with the central mechanism of ecosystem health and stabil-ity — diversification.
2. The ecosystem approach
Since it was first coined in 1935 by Arthur Tansley, the ecosystem concept has generated dis-agreement and controversy (Bocking, 1994). In a review of the concept’s history, Bocking notes that many ecologists opposed the introduction of the term, preferring to concentrate on studying the behaviour, interactions, and responses of indi-viduals and populations to environmental condi-tions rather than entire ecosystems (Bocking, 1994: p. 16). On the other hand, the concept has proved resilient in the face of significant criticisms concerning its definitional fuzziness and failure to generate testable scientific hypotheses (Bocking, 1994; Grumbine, 1994, 1997; Kay and Schneider, 1994; Christensen et al., 1996). In the late 1980s and early 1990s, it took on a new lease of life, becoming embedded in the theory and practice of ecosystem(-based) management, referred to here as the ecosystem approach (Franklin, 1993; Slo-combe, 1993; Grumbine, 1994, 1997; Keiter, 1994; Alpert, 1995; Clayoquot Sound Scientific Panel, 1995).
ecosystem-oriented one’s approach is, the greater is the tendency to employ an ecocentric value set aimed at preserving ecosystem health. Yet, notwithstanding such differences in interpreta-tion, the promise of the ecosystem approach is that it creates space to engage in a fundamental re-thinking of the paradigm governing human-ity’s relationship with the natural world, creat-ing ‘an opportunity to promote radical change’ (Bell, 1994: p. 24).
The essence of the ecosystem approach is the adoption of a systems approach to nature, em-phasizing its holistic, hierarchical, interdependent and complex/chaotic structures and processes. The approach contains also a positive concept of ecosystem health, a key indicator of which is the maintenance of biodiversity, and implies the need for adaptive management as well, a process requiring a remarkable level of inter-governmen-tal cooperation among state agencies and the democratization and devolution of management responsibilities to those who most suffer the consequences of ecosystem degradation and de-struction (Franklin, 1993; Slocombe, 1993; Grumbine, 1994, 1997; Keiter, 1994; Alpert, 1995; Clayoquot Sound Scientific Panel, 1995; Christensen et al., 1996).
Taken together, the above three insights con-stitute a fundamental critique of modern, indus-trialized, single-species approaches to natural resource management. The ecosystem approach replaces the dominant reductionist and mecha-nistic model of nature as a resource to be ex-ploited to generate use and exchange values with a systemic and biological model that emphasizes the goal of ecosystem health and integrity in the generation of a wider and more diffuse set of use, exchange, existence, option and, for some, intrinsic values. The key difference separating the industrialized from the ecosystem approach is the former’s manipulation of ecosystem parameters over the short term to achieve large increases in the goods and services with high exchange value. This can be contrasted with the latter’s aim to preserve the health of an ecosys-tem within the parameters of its natural varia-tion, generating a steady flow of
anthropo-centric and non-anthropoanthropo-centric goods and ser-vices indefinitely (Botkin, 1990; Wilson et al., 1994).
It is in its focus on ecosystem health and in-tegrity that one discovers the central ecosystem principle of diversification. The concept is most widely used as a suffix in the term biodiversity, where it refers to the variety of life at all levels — genetic, species and ecosystem (Wilson, 1992). Diversity is critical because it contributes to the maintenance of ecosystem health and in-tegrity. According to Christensen et al.:
Biological diversity provides for both stability (resistance) to and recovery (resilience) from disturbances that disrupt important ecosystem processes. Resistance often results from com-plex linkages among organisms, such as food webs that provide alternate pathways for flows of energy and nutrients. The presence of numer-ous organisms with similar capabilities — sometimes inappropriately viewed as redundan-cies — also provides for ecosystem stability as well as optimal functioning …. The importance of species diversity to the ability of ecosystems to recover ecosystem processes such as produc-tivity following a disturbance or perturbation has been convincingly demonstrated in long-term studies of productivity responses to drought in grasslands …. (Christensen et al., 1996: p. 11).
3. International trade theory
There is a profound tension at the heart of the dispute between environmentalists and trade pro-moters that has received insufficient attention. The tension concerns the central underlying as-sumption of modern trade theory and, indeed, of the modern system of production, exchange, and consumption. The nature of this conflict can be grasped most clearly by contrasting the ecosystem approach with classical and neoclassical theories of trade.
While there are a number of competing theories on why trade takes place between enterprises in different countries (Ellsworth and Leith, 1984; Lipsey et al., 1988; Caves, 1996), the central theo-retical economic justification for trade, which also explains a considerable portion of what happens in practice, can be traced back to David Ricardo and the subsequent development and elaboration of the ‘law’ of comparative advantage. The Ricar-dian theory of comparative advantage states that trade is both possible and beneficial between countries, even if some of them have an absolute advantage in the production of all goods and services. According to classical theory, the basis for trade occurs because of differences in the relative productiveness of labour in the domestic manufacture of goods and services within a coun-try. Although Portugal may be able to produce both wine and cloth at a lower (labour) cost than England, it still makes sense for England to trade with Portugal. This is so because — under a set of assumptions that are not particularly onerous — if Portugal switches additional units of labour from cloth to wine production (i.e. to the product that requires the least input of labour per unit of output) and England does the converse, the total volume of wine and cloth can be shown to in-crease. Consumers in England and Portugal can benefit from this net increase in production through international trade, with England pro-ducers exporting cloth to Portugal and Portuguese producers exporting wine to England (for a de-tailed ecological critique of this free-trade argu-ment, see Gale, 1999).
The practical consequences of the operation of comparative advantage are increased
specializa-tion in the producspecializa-tion of goods and service in both countries. That is, if producers in Portugal switch a portion of their resources out of cloth production and into wine production, the country becomes less specialized in producing the former and more specialized in producing the latter. At the extreme, producers in Portugal will cease to produce cloth, and produce only wine, and pro-ducers in England will cease to produce wine and produce only cloth. While the operation of the ‘law’ of comparative advantage does not mandate that producers in different countries achieve com-plete specialization (and there are good theoretical reasons to believe that in many cases complete specialization would not occur), it is clear that the gains from trade that are consequent on the oper-ation of the law of comparative advantage occur through the process of increased specialization. Nor is this merely a theoretical corollary: special-ization at the national level in the production of certain goods and services to the (virtual) exclu-sion of others is clearly observable in practice. In many Third World countries, for example, such as Cuba, Senegal, and Guyana, there is a very high export dependence on the production of sugar, groundnuts and timber for sale in developed-country markets. Specialization in the production of tradable goods takes place in developed coun-tries as well, though: in Canada, for example, a highly capitalized forest industry specializes in the production of commodity forest products such as softwood lumber, pulp and paper production for export to the USA, Europe and Japan (Burda and Gale, 1998).
4. Conflicting principles: ecosystem diversification versus trade theory specialization
a consequence of endogenous and exogenous pro-cesses. Ecosystems are self-organizing or autopoi-etic systems that require diversification of both components and processes to maintain dynami-cally stable trajectories. According to the theory, ecosystems can, at best, only be partially man-aged. Human interventions to generate use and exchange values, therefore, must respect ecosys-tem parameters and maintain the diversity of ecosystem components and processes.
From a trade theory perspective, on the other hand, countries with abundant natural resources and relatively little capital have a comparative advantage in the production of relatively unpro-cessed commodities such as logs, lumber, pulp, fish, water, and basic ores. In order to capitalize on their comparative advantage in commodity production, producers in such countries should specialize in the production of primary commodi-ties, channelling labour, capital, technology and R&D resources into those sectors, and trade the produce for more capital-intensive imports from other, capital rich countries. The key question here concerns the nature of the specialization that occurs as a result of increased opportunities and pressures to trade. Thus, for example, one form of specialization might involve the purchase of more dedicated capital equipment (a feller-buncher, for example, to harvest logs more efficiently than more labour-intensive yarding methods). Or it might involve importing know-how to eliminate waste and increase labour productivity in the work place. However, and this is critical, it may also and frequently does involve manipulating ecosystems directly to produce a particular, de-sired, commercial product more quickly and with less variation than occurs naturally. In many parts of the world, forest, prairie, river and ocean ecosystems have and continue to become special-ized to increase the production of commercially desirable goods and services.
The application of the principle of specializa-tion to ecosystems for the producspecializa-tion of products is most clearly visible in the agricultural and forest sectors of modern economies. Modern in-dustrial agriculture invests capital, labour and technology resources to transform natural range and forested lands, which previously generated a
large range of values, into specialized ecosystems devoted to the almost exclusive production of exchange values. The specialization of ecosystems for the generation of exchange value is seen in the planting of monocultures of genetically modified hybrids dependent on huge systems of irrigation and chemical fertilizers, herbicides and pesticides. Not only has agricultural production sought to create specialized ecosystems, but such specializa-tion endures over time and extends out across space as these specialized ecosystems demonstrate their ‘economic’ capacity to generate income. Farmers who try to resist the logic of specializa-tion eventually find themselves economically mar-ginalized and dispossessed by those who embrace it.
In the forestry sector, complex, multifunctional, old-growth forests that provide habitat for a huge range of animals, plants and micro-organisms are being simplified into specialized ecosystems de-signed to provide a few species of fast-growing trees to maximize the production of exchange value. Around the world, old-growth forests are being replaced by single-species tree farms that require significant inputs of fertilizers, herbicides and pesticides. The entire rationale of modern forestry, whether it be practiced by proponents of sustained-yield, multiple-use, or sustainable forest management, is to replace complex, uneven-aged, multispecies, biodiversity-rich forest ecosystems with simplified, even-aged, single-species, biodi-versity-poor, tree farms (Maser, 1990; Gale, 1998).
some of the most intensive struggles, between those who promote ecosystem specialization the better to produce economically valued goods and services and those who promote ecosystem diver-sity, the better to safeguard the system’s capacity for autopoesis.
5. Trade and exchange
The above analysis provides a partial rationale for environmentalists to oppose trade liberaliza-tion, justifying their efforts to undermine the NAFTA and WTO. Environmentalists need to think through the implications of the potential conflict between ecosystem diversification and economic specialization, however. The conflict be-tween the two principles does not automatically justify the adoption of eco-mercantilist policies in which tariff and non-tariff barriers are once again deployed by the state to minimize imports and shorten the links between producers and con-sumers. The principle of specialization that en-ables the gains from trade to be realized from the operation of the ‘law’ of comparative advantage is but a special case of its more general operation within all market economies. That is, even if effective trade barriers are erected to block im-ports, the principle of specialization will continue to operate within the state, simplifying ecosystems in the interests of efficiency, productivity and profit.
That this is the case can be seen from the following thought-experiment. Let us suppose that the USA were to cease all trade relations with other nations, and to adopt the autarkic policy of producing all the goods and services desired by its citizens from within its own borders. Apart from the massive economic dislocation such a policy would create both within and outside the borders of the USA, the operation of the principle of specialization has only been partially challenged. Thus, economists advising the newly elected au-tarkic US government would see nothing wrong in recommending the continued application of the principle of specialization within the USA. In-deed, significant environmental damage could re-sult if the degree to which the principle was
operationalized was deepened to ensure the do-mestic production of currently imported commod-ities such as coffee, oil, tea, bananas, and timber. The problem, in short, is that the principle of specialization embedded in the theory of interna-tional trade cuts a lot deeper than the focus on international trade permits. The principle justifies the specialization of labour, capital, technology, and ecosystems in order to increase exchange values over the short term without concern as to whether such specialization is occurring as a re-sponse to domestic or international demand. There is no recognition within economic theory that the operation of the principle of specializa-tion might, in certain circumstances, result in disbenefits to society. The lack of internal con-straints in the theory and the practice of econom-ics on the applicability of the principles of generalization virtually ensures the continuation of ecosystem simplification in the interests of those seeking more efficient means of creating use and exchange values.
6. Conclusion
How can these two principles be reconciled so that society can achieve the social benefits that specialization generates without sacrificing the natural benefits that diversification requires? This question goes to the heart of past and present debates on what might constitute environmentally sustainable production. At one extreme in this debate are anti-environmental apologists who see nothing wrong with the rampant industrialization of nature in the interests of increased ecosystem productivity and profit. For example, although often couched in the language of ‘sustainable development’, many North American forest com-panies continue to transform old-growth forests into monoculture tree farms growing genetically modified trees that require the widespread appli-cations of herbicides, pesticides and fertilizers to achieve growth and quality targets. At the other extreme are deep ecologists, who ground their views in the notion of nature’s ‘intrinsic value’, seeking the preservation of vast tracts of land without much regard for social costs. Both, in effect, commit the same mistake. Forest industri-alists over-extend the principle of specialization, seeking to manipulate each and every ecosystem for profit, while deep ecologists over-extend the principle of diversification, arguing that no inter-vention whatsoever should occur to protect na-tures ‘intrinsic value’.
It is between these two extremes that there is ground for compromise and reconciliation. One such approach that achieves this is ecosystem(-based) forestry, an approach that balances the principles of specialization and diversification in two ways. First, it supports extensive landscape level planning by multidisciplinary teams of scien-tists (biologists, ecologists, hydrologists, soil-sci-entists, social scientists, and specialists in traditional ecological knowledge) who study the structure and processes of ecosystems to deter-mine which areas must be set aside for biodiver-sity and cultural protection. The report of the scientific body is then fed into an informed public debate over which lands are, and which are not, to be logged. This balances the principles of spe-cialization and diversification at the landscape level. Second, on the smaller, working forest land base that inevitably becomes available as a result
of this process, the ecosystem(-based) approach establishes the guidelines for, and certifies the practices of, foresters to ensure the maintenance of a wide range of forest values in addition to the generation of exchange value. The principle of specialization is balanced with diversification at the level of forest practices.
It is in this focus on production practices that we can begin to see that the debate over interna-tional trade is something of a red herring. If certified forest products are being produced on Vancouver Island, Canada, using an ecosystem-based approach to forestry for sale in Seattle, USA, then the fact that this constitutes an exam-ple ofinternationaltrade is far less important than the fact that the goods have been manufactured according to a rigorous set of production stan-dards that balance the principles of specialization with diversification. Conversely, if uncertified forest products are being produced on Vancouver Island via the clearcut logging of old-growth forests and traded to another part of Canada (i.e. Ontario), then the fact that this constitutes an example of national trade is far less important than the fact that the goods have been produced unsustainably without regard to the ecological principle of diversification. The environmental ob-jective in relation to trade policy is not to defend the virtue of national production against the vice of international production, but to defend the virtue of sustainable production against the vice of unsustainable production — nationally and globally.
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