Why and how are environmental issues becoming more of an issue for Essay

Why and how are environmental issues becoming more of an issue for international business and international institutions - Essay Example Many researchers and academics have hypothesized that the advent accelerated and competitive economic globalization, trade barriers liberalization such as †free trade agreements† and industrialization have created what they call â€Å"pollution havens† in many countries and communities. The pollution haven hypothesis states that pollution heavy industries will relocate to jurisdictions with less stringent environmental regulations as a strategy to further reduce production costs (Mrwhatis, 2011). The validity of the â€Å"pollution haven† hypothesis has been a long debated one between academics and policy researchers. Early research theory works of Pethig (1976) and McGuire (1982) first presented the theory that in case of increased environmental regulations in the home country would lead to increased plant relocation to countries with less stringent environmental regulations as long as free trade agreements or trade liberalization allowed it (Webmeets, 2012 ). Regardless of the enormous amount of research and empirical studies on the subject, it has not settled the debate one way or the other. Under one version of the â€Å"Pollution Haven† hypothesis it is believed that less developed countries value economic growth more than protecting the environment and natural resources, therefore their operating standards for environmental protection tend to be extremely lax to almost non-existent. As a direct consequence, these jurisdictions with low environmental protection regulations will tend to concentrate pollution heavy industries and create localized pollution havens. Although the negative environmental impact and general welfare for these communities can be significant, the positive economic impacts brought by the new jobs far outweigh the negative consequences. According to Grossman and Krueger (1993) and Jaffe (1995) there is not considerable evidence supporting the existence of pollution havens as a direct result of factor end owment and economies of scale considerations. They argue that free trade by itself might not harm the environment, but more likely a result of various factors. Antweiler et al.(2001) and Grossman and Krueger (1993) state that information asymmetry related created when the government regulators do not measure the actual production level nor means of production technology to derive actual pollution derived from the company itself as one of the key factors. Other causes such as aggregate demand for the polluting product, a technique effect (polluting intensity due to operational factors intrinsic to the industry), and the actual share of revenues derived from the polluting industries