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Impact of Free Trade and Regulated Trade on Environment

International trade has positive and adverse effects on the environment, economy and social set-up of any given country. Free trade and regulated trade as forms of international trade have enabled most countries to achieve Impact of Free Trade and Regulated Trade on Environmenteconomic growth. Some of the positive effects of free trade include expansion of markets, infrastructural development, access to cheaper and modern technology, and labor and capital mobility. Free trade enabled different countries to acquire goods and services which they are not able to produce. Free trade has led to increased cases of environmental degradation as the existing natural resources are exploited to create products. Some of the industries do not observe environmentally friendly methods of production thus reducing the quality of the environment. The effects of free trade on the environment have prompted different countries to develop policies that regulate the use of natural resources in production. Besides, they are encouraging environmentally friendly methods of production. Most countries promote the use of renewable sources of energy to reduce the effects of production on the environment. Therefore, this report outlines the impact of free trade and regulated trade on the environment. Much of the study regarding the effects of free trade on the environment was carried out in the United Arab Emirates. The report outlines various tariffs imposed on the business regulation impact on the environment.

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International trade is a trading activity that occurs between different countries where they exchange various goods and services. The existence of international trade has affected how different countries carry out the business activities. Most countries in the world have achieved their current economic status as a result of the international trade. This has influenced their gross domestic product and spurred economic development. International trade can take the form of bilateral or multilateral trade. Bilateral trade takes place between two countries.  The trading countries must sign trading agreements to regulate the exchange of goods and services. On the other hand, multilateral trade takes place between more than two countries. International trade can also take the form of free or regulated trade. In free trade, there are no barriers that restrict the importation of goods by member countries. On the other hand, in the regulated trade, the trading partners enforce rules and regulations which limit the movement of goods across the borders. Such restrictions include trade tariffs, quotas, and total ban among others.  In international trade, the trading partners the products and services of their comparative advantage. Today, the trading activities between different countries are regulated by various trade organizations such as World Trade Organizations, World Fair Trade Organization, and European Free Trade Association among others. International trade has had multiple impacts on the environment and the economy of different countries. For instance, free trade has promoted environmental degradation in various parts of the world. This has affected the ozone layer leading to climatic changes in different regions of the world.

Significance of the Report

Free trade and regulated are beneficial to the economic development of a country. They aid in the infrastructural developments and the expansion of the economy. The UAE allow free movement of goods from other countries such as UK and other European countries without imposing tariffs. Free trade allows mobility of factors of production such as labor and capital. In this case, it contributes to transfer of new technology to the UAE. Besides, the existence of several technocrats in the UAE has promoted the level of education and other social amenities such as hospitals. The reports is also of great significance since it outlines the need to develop various legislations that the government can put in place to regulate illegal trade. Most countries practice regulated trade so as to protect their domestic industries and to promote employments. However, both free trade and local trade pose several threats to the environment. Free trade encourages transfer of pollution which reduces the quality of the environment. This report is beneficial since it outlines the best type of trade which is good for the environment. The report describes the impacts of both free and regulated trade and their implications on the environment. Therefore, the international markets which are committed to protecting the environment will determine the type of trade that can allow them to protect the environment from degradation.

Literature Review

Free trade has worked successfully in different countries such as South Korea, Japan, China, UAE and other parts of the world. According to Yu (2010) trade liberalization allowed these countries to achieve the current status of being developed countries. Various countries formed economic partnership agreements to facilitate trade between their borders. The primary objective of such partnerships is to achieve economic growth, gain technical support and address environmental issues. The partnerships encouraged different countries to engage in trading activities without exploiting their business partners regarding the natural resources they have. In this case, most countries realized economic development. Coffee et al (2015) asserts that commercial partnerships have also worked for various countries in the Sub-Saharan Africa such as Egypt and South Africa. Coffee, Sale and Henderson (2015) have analyzed the situation of free trade and proved that it enables countries to carry out foreign investment in the developing countries. This increases the level of revenue in the developing countries. The increased revenue is then channeled to various economic developments such as the construction of roads and social amenities which serve the common citizens. Vogel (2009) asserts that free trade increases the chances of employment of the local population. This reduces the rate of unemployment in the developing countries. Vogel (2009) in his analysis asserts that free trade agreements have shifted the economic status of several countries from the undeveloped countries to developed countries. For instance, foreign direct investment has contributed to the economic development of United Arab Emirates. The United Arab Emirates is one of the largest economies of the Middle East. The country signed various trade agreements with the United Kingdom, and these have seen the UK setting up over 5000 companies in the country. The economy of the country is continuously growing, and soon it will be considered as one of the developed countries in the world. However, free trade has posed various environmental challenges to different countries. Shaffer (2010) asserts that the industrialization experienced in these countries has affected environmental quality in three ways. Firstly, the goods produced may impact negatively on the environment. Secondly, the methods of production utilized also have an adverse impact on the environment (Shaffer, 2010). Lastly, the extent of economic output also has an influence on the environment.

The methods of production used leads to environmental pollution. The smoke produced from different industries is detrimental to the environment. This has affected the ozone layer leading to global warming. In the recent past, the world has experienced dramatic climatic changes (Coffee, Sale & Henderson, 2015). The reason behind this is the increased economic and industrial production which emits poisonous gasses into the atmosphere thus affecting the ozone layer. According to Coffee, Sale and Henderson (2015), the expansion of trading activities as a result of free trade has enabled countries to exploit their natural resources. Every country is committed to what they can do best by utilizing the resources of comparative advantage.  Yu (2010) in his analysis asserts that those who are opposed to comparative advantage argue that comparative advantage is the leading cause of dirty industrial production processes. This has polluted the developing and the industrialized nations leading to environmental damage. The scale of economic activity also changes the techniques used in production. Increased industrial production leads to increased production of more material goods (Shaffer, 2010). In the process of production, several by-products are also produced causing water and air pollution. Pollution is detrimental to the environment since it reduces the quality of the environment. According to Shaffer (2010), increased economic activities as a result of free trade have led to various adverse effects on the environment since more of the environmental amenities are utilized. Besides, the per capita incomes realized tend to drive pollution. People are motivated to use natural resources which are only found in the environment. However, various efforts are being made that encourage cleaner production techniques. This includes recycling and utilization of renewable sources of energy (Coffee, Sale & Henderson, 2015). Free trade has worsened the measures being put in place to reduce pollution. Most industries emit sulfur dioxide to the atmosphere. The gas is believed to be the primary cause of various cancerous diseases in the world such as skin cancer.

Analysis and Description

General Comparison

This report outlines the importance of free trade and its impacts on the environment. It is through free trade that the developed countries have been able to industrialize since they can acquire industrial raw materials from developing countries and a lower cost. The industrialization has been the major cause of environmental degradation since most industries do not consider the impact of the effluent they emit on the environment (Shaffer, 2010). On the other hand, there are rules and regulations that govern regulated trade. The laws protect businesses and companies from unfair practices that are harmful to the environment. The existing laws require various industries to adhere to environmentally friendly methods of production. In this case, it is clear that regulated trade is the best for the environment.

  • Social Impacts

In the regulated trade, the government imposes various rules and restrictions to prevent people from engaging in illegal businesses. The government enacts various legislation to protect its industries from unfair competition (Coffee, Sale & Henderson, 2015). Besides, the trade regulations also protect people from deceptive business practices that may affect the quality of the environment. The trade regulation laws protect people from misleading advertisements that may influence the consumers.

  • Environmental Impacts

Under regulated trade, the government can control the number of goods produced and the production methods used in various industries (Yu, 2010). Such regulations are meant to encourage companies to use environmentally friendly methods of production. The rules promote utilization of renewable sources of energy. Adoption of trade regulations has encouraged certain countries such as Switzerland to reduce cases of environmental degradation caused by mass industrial production. Free trade encourages transfer of pollution from developed to developing countries. This is because the developed countries develop subsidiaries industries in the third world countries. Besides, the products imported to the developing countries also contribute to pollution.

  • Economic Impacts

Regulated trade is only beneficial to developed countries. This is because the tariffs prevent importation of various products to the economy (Coffee, Sale & Henderson, 2015). Countries which practice regulated trade have advanced technology and diverse resources that allow them to produce products that can be used to sustain the economy. Free trade is usually practiced by countries that do not have scarce resources and technological inefficiency. In this case, the trading partners would use their sources of comparative advantage so as to benefit from the trade.  Every country would exploit the resources at its disposal to manufacture products that would enable them to benefit from the trade. Today, mostly developed countries benefit from free trade. Most of them export industrial manufactured goods as compared to agricultural resources received from developing countries. They transfer pollution to the developing countries through their manufactured products (Sun & Reed, 2010). Regulated trade does not enhance trading activities in the developing countries. This is because most developing countries are barred from importing their products into such countries. They have developed their economy in such a way that they export more of the goods and services as compared to what they import. For instance, the UK and other developed European countries import their manufactured goods to Asian and African countries. In return, they receive agricultural or raw materials they use in their industries to produce goods. In this case, there is an imbalance system of trade since there is no mutual benefit.

The Case of the UAE

The United Arab Emirates share bilateral trade relations with the United Kingdom. The UAE is the major export market for the United Kingdom’s local products. The economy of the United Arab Emirates has been diversified away from oil. Today, the non-oil sector contributes the largest share of its GDP. The economy of the United Arab Emirates is the second largest in the Arab community after Saudi Arabia. The country is a home to several British multinational companies. Some of the major British enterprises that operate here include BP gas, BAE systems, Mott McDonald, Shell and Rolls among others. The country hosts more than 5000 British Companies. Besides, there are more than 700 commercial agencies which have invested in the United Arab Emirates. The majority of the country’s population is made up of expatriates. The United Kingdom enjoy various incentives that allow it export her products to UAE. The two nations enjoy bilateral trade relations with little trade barriers. Such incentives include the diverse economy of the UAE which is continually expanding and growing. Besides, its proximity to the Gulf market is also an added advantage since this provides a vast market for the European products. The strategic location of the UAE makes it an economic hub for most countries from the Middle East, North Africa and other Asian countries. The increased trading activities between UAE and other parts of the world has exposed it various environmental hazards caused by free trade (Sun & Reed, 2010). Free trade has allowed the United Arabs Emirates to experience rapid economic development. Regulated trade contributed contributes to the growth of domestic companies. This is because it restricts the importation of products which can be produced locally in the country. The existence of both renewable and nonrenewable energy in the country has attracted various foreign companies. This has led to the influx in the number of expatriates from the UK and other parts of the world. The high labor mobility has had various impacts on the environment of the United Arab Emirates

Results and Conclusions

Most countries participating in the international trade are continuously implementing various regulatory measures to protect their resources and the environment at the same time. Such regulatory measures include export controls, trade embargoes, economic sanctions, and customs procedures. Besides, most countries have reviewed direct investment policies to protect their environment and economy from exploitation. The regulatory measures require companies to utilize environmentally friendly methods of production and renewable energy (Borchert, Gootiiz & Mattoo, 2014). This would protect the environment from degradation and economic exploitation. Trade embargoes have been adopted by various countries who participate in the international trade to prevent importation of various products from other countries. This policy allows the country to protect its domestic industries and encourage employment in the country. Trade embargoes are only applicable to developed countries which have several manufacturing industries. Besides, countries that are utilizing trade embargoes in the international market are endowed with economic resources that can allow them manufacture their products without importing raw materials from other countries (Borchert, Gootiiz & Mattoo, 2014). In this case, they benefit from the trade since the manufactured goods are demanded with the developing countries. It is a regulatory policy that prevents a country from economic exploitation. This will allow the country to utilize its economic resources in the most effective way.

Other countries are also using economic sanctions on the importation of certain products that are harmful to its citizens. Economic sanctions protect the receiving country’s economy since it avoids importing goods that may be detrimental to the health of the citizens and the economy at large (Borchert, Gootiiz & Mattoo, 2014). Economic sanctions are useful in protecting the resources of a country since it will import only products which are useful to its people. It would discourage economic relations with countries which manufacture counterfeit products which may be deceiving. The imports and exports tariffs are utilized as a regulatory measure to protect the resources of countries participating in international markets. They employ the use of quotas to regulate the amount of goods imported or exported to a particular country. This is useful in ensuring that the country only imports products that its economy can sustain. On the other hand, export tariffs ensure that the country does not exports more of its resources to other countries. The export tariffs are useful to countries participating in the international markets. This is because the country will not exploit its natural resources manufacture more products that can influence its economy. The nations involved in the international utilize export tariffs to protect their environment from exploitation.

Free trade and regulated trade plays a significant role in the development of the economy. However, they come with various impacts that reduce the quality of the environment. Most industries in the world have developed as a result of international trade. The industries utilizes natural resources such to manufacture economic products which are traded in the market (Borchert, Gootiiz & Mattoo, 2014). With the rise in population and demand of the manufactured products, countries are continuing to exploit their natural resources so as to meet the demand of the manufactured goods in the international market. The companies involved in the production of goods utilize various methods of production. Some of the methods utilized are detrimental to the environment. Most industries release their by-products in the water and air. Such effluents affect the lives of animals living in the water. Besides, the continued release of effluent products in the water also affects the lives of human beings who utilize the water for domestic consumption. The toxic gases which are released into the atmosphere also affect the ozone layer. This has been the major cause of climatic changes in the world. Today, it is difficult to determine the changes in the climate because of the increased amount of gases released in the atmosphere.


In an effort to ensure that the environment is protected from pollution, the countries participating in the international trade have embraced multidisciplinary policies to ensure that the environment is protected from degradation. The multidisciplinary policies are meant to promote utilization of renewable sources of energy that are environmentally friendly. These policies will ensure that the products produced can also be reused. This will reduce the amount of raw materials that go into waste. To promote effective international trade companies are being encouraged to produce non-renewable products which are biodegradable. The biodegradable products will increase international trade since countries which produce such products will expand their markets. It also advisable for companies to recycle their products to reduce the amount of materials that goes into waste.

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