Trade, natural resources and developing countries - Trade and the Environment - page 55

5 Trade, natural resources and developing countries

Edward B. Barbier

In the current era of globalization two concerns have been expressed about the environ-
mental e rst, which is a more frequently heard crit-

icism, is that trade is 'bad' for the environment. Economic arguments underlying this view
usually cite alarm over economic scale relative to ecological limits and the implied e

ff ects of expanding world trade. The fi

ects
of globalization on incentives for domestic environmental regulation (see Daly and
Goodland, 1994; Rees, 2006). The counter-argument in economics has been that 'in
general, trade is not the root cause of environmental problems, which are due to market
and intervention failures' (OECD, 1994, p. 8; see also Copeland and Taylor, 2003). Many
of the other chapters in this handbook address this trade versus environment debate;
therefore it will not be the focus of the following chapter. Instead, I shall focus here on a
second concern, which suggests that trade could be 'bad' for development: many devel-
oping countries are currently failing to manage their natural resources e

ff

ciently and sus-
tainably for successful development, and 'opening to trade' could be perpetuating the
mismanagement problem. This view stems from recent empirical ndings that many

resource-dependent developing countries - those countries with a high percentage of
resource-based commodities to total exports or to GDP - tend to have lower levels of real
GDP per capita, lower growth rates, higher poverty levels and a higher proportion of their
populations living in poverty (Barbier, 2005; Bulte et al., 2005; Ding and Field, 2005;
Mehlum et al., 2006; Neumeyer, 2004; Rodríguez and Sachs, 1999; Sachs and Warner,
1997; 2001). As summarized by Jurajada and Mitchell (2003, p. 130).

fi

the main upshot of this literature is two-fold: rst, natural resources, if not well-managed in well-

built markets, will impede growth through rent-seeking; and second, an abundance of natural
resources leads to serious policy failures: for example, if the windfall from a natural-resource
boom is poorly invested, it can have long-run detrimental effects.

fi

The following chapter explores more closely this perceived relationship between trade,
natural resource mismanagement and long-run development. First, we clarify that this
concern is a new one; although it appears to be related to a somewhat older criticism of
trade, i.e. the postwar 'unequal develoment' thesis that primary product exports fail to
provide the 'engine of growth' for developing economies, we argue that this is a mislead-
ing analogy. Second, we show that, while the concern about resource dependence and the
poor economic growth performance in modern devleoping economies may be justi

ed, it
addresses only two of the four 'stylized facts' concerning natural resource use in these
economies. To understand more fully the relationship between trade, natural resources and
long-run development, it is necessary to assess the implications of all four stylized facts.

fi

Resource dependence and unequal development
The recent concern over the relationship between resource dependence and the poor eco-
nomic growth performance of many developing economies has revived the older 'unequal

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