While the liability laws relating to crimes against
the environmental vary from country to country, there is a definite trend
in the North towards introducing stricter legislation. Strict liability
legislation in relation to surface pollution directly influences the conduct
of an enterprise in choosing a location for its activities and investments.
In the North, companies always commission an environmental surface study,
and they sometimes also require the previous owner to furnish them with
a guarantee of non-liability, before deciding to purchase land and buildings.
If they do discover that the land is polluted and if they are not guaranteed
protection against liability claims, they will not purchase the property.
The fear of being pursued by damage claims is not
unfounded. In the Netherlands, for example, there have been many examples
of companies causing very serious surface pollution, sometimes many years
earlier. This damage totals between 126 and 180 billion guilders, and is
spread over more than 100,000 properties. The so-called New Civil Law holds
the property owner responsible for all pollution, even if the owner can
in no way be blamed (risk liability). The period of limitation of 30 years
is not always applicable, and a plea of ignorance not always valid. Hundreds
of civil suits are currently in preparation or under review. Those involved
face severe financial threats. This has made companies, citizens and the
government decidedly more claim conscious.
Northern scientists and politicians were pleased
with this vindication of their argument that stricter environmental legislation
does not lead to job and industry loss in the North. They reaffirmed that
it was possible to conserve both welfare and the environment! But the matter
is not quite so simple. While few companies have actually moved, (i.e.
the same enterprise closing a factory in one area and investing in another
in another area), production is being relocated. When one company
decides stops the (environmentally polluting) production of certain goods,
buyers are then forced to look elsewhere. This provides new companies with
new expansion possibilities, possibly in the Third World. The end result
is that production is relocated from one country to another.
It is probably more true to say that the world market
has been relocated. This process of relocation is happening in a number
of basic metals industries, in the heavy - bulk - chemicals industry and
in other industrial branches. Wherever these production industries go,
the country experiences rapid industrial growth - and extra environmental
problems. Because these branches of industry are growing
faster
in the South than they did in the North, the strain on natural resources
there is greater, the local environment suffers, and the public is exposed
to high health risks.
Asian economies (excluding Japan) are growing
faster than those of Europe and the United States. The textile, electronics
and car industries, in particular, are expanding in size. These types of
businesses are important customers for the chemical industry - and the
chemical industry (for example plastics and other semi-manufactured products)
is flourishing. In 1993 the chemical market expanded in Asia (excluding
Japan) by no less than 8 per cent, while elsewhere in the industrialized
world, growth stagnated. Participants in this growth are both Asian enterprises
and transnationals from the United States, Europe and Japan, who invested
huge sums in new production units. The Asian market was not the only outlet;
through the combination of low costs and modern technology it was possible
to compete on the international market despite long transportation distances.
This was clearly the case with organic dyes: between 1982 and 1991 the
Asian share of world exports of organic dyes rose from 13 to 24 per cent.
The tremendous growth of the chemical industry and
the shift of the fulcrum to Asia is illustrated in the following prognosis:
| World market for chemical products | |||||
|---|---|---|---|---|---|
| In billion dollars, and in percentages | |||||
| Billion dollars | Growth | Global distribution (%) | |||
| 1992 | 2000 | % | 1992 | 2000 | |
| North America | 319 | 400 | 25 | 29 | 29 |
| Western Europe | 430 | 500 | 16 | 40 | 36 |
| Asia | 335 | 490 | 46 | 31 | 35 |
European transnationals find Asia attractive because of its growth potential, but there also so-called push factors. Manfred Schneider, president director of the chemical giant Bayer, described it in this way:
"The main disadvantages we face (in Europe) are
higher labour costs and expensive social security systems, coupled with
the wide-spread regulation of environmental affairs by the state. We have
to overcome these handicaps. If we do not, many areas of our business (in
Europe) will become uncompetitive and therefore in danger of being squeezed
out of the market." <13>
To conclude that the geographical shift of polluting
production processes is not as bad as it seems is not only short sighted,
but complacent. It assumes that environmental measures in the North are
effective. Unfortunately we all know that the "stricter" environmental
policy in the North has not been able to deal with either international
or local environmental problems.
It would be more logical to conclude that the badly
needed tightening of environmental measures in the North will indeed lead
to the exodus of large, environmentally polluting production processes
to the South. The example below shows how that possibility became reality
in the phosphoric acid industry.
Phosphate, in the form P205, is a nutrient
for plants and a building bloc in food production. Modern intensive agriculture
boosts natural phosphate levels in the soil through the addition of the
phosphate fertilizers. The production of this chemical fertilizer is one
of the many stages in the food production chain in which this nutrient
continually changes shape. Many environmental problems arise throughout
the entire chain, one of which is the production of phosphoric acid, which
is particularly well-known for the discharge of waste gypsum into surface
water and the release of the highly polluting substances, phosphorous,
cadmium and radon-226, into the environment. For every ton of phosphoric
acid (P205) produced, five tonnes of unclean phospho-gypsum is discharged.
In the 1980s, Western European governments
exerted their authority to stop such discharges, demanding a reduction
in the quantities of free phosphorous drained because of its eutrophic
interaction with surface water. Many local governments demanded a total
halt (mostly in phases) to the discharge of cadmium - an EC blacklisted
substance.
At first, the Western European chemical fertilizer
industry responded with delay tactics. They began researching alternative
methods for processing the gypsum. They looked into storage on land, as
is done in the United States, and into reprocessing the waste into building
material. The largest chemical fertilizer producer in the world, Norsk
Hydro, initiated an ostensibly serious effort to develop a new cadmium
cleansing technique at their plant in Vlaardingen, the Netherlands. The
second largest, Kemira, offered to modernize its entire plant in Rotterdam
in exchange for a promise by the local authorities to freeze their stricter
discharge standards for at least 20 years. In anticipation of research
results and investments in cleaner techniques, companies everywhere requested
postponement of the application of the stricter discharge standards. However,
local governments took measures to progressively tighten rather than freeze
the discharge standards.
At the end of the 80's, in order to meet the
stricter discharge standards, many producers in Western Europe switched
to a cleaner raw material, low-cadmium phosphate rock. In three European
locations producers switched to less environmentally harmful nitrophosphate
production methods. These were Norsk Hydro
in Porsgrunn (Norway), BASF
in Antwerp and Chemie Linz (Austria).
The Western European phosphoric acid producers were
also riddled with economic problems. In 1988/89 the Moroccan state-owned
concern, OCP, started expanding its production capacity since Morocco can
benefit from cheap phosphate ore mined on its own territory.
A global glut arose at the same time that Western
European demand for phosphate fertilizer shrank and prices begun to dive.
Cheap imports from North Africa snatched the market from European producers
and Morocco is still expanding capacity to meet export markets. In 1996,
total world phosphoric acid production capacity will have risen by 1.9
million tonnes.
Along with the continuing decline in the use of
chemical fertilizers in Western Europe, this bodes ill for the European
phosphate fertilizer industry. These negative market prognoses have forced
corporations to close production units. From January 1992 to April 1993
alone, 1.35 million tonnes of P205 phosphoric acid production was abandoned
in Western Europe. That is more than one third of the total capacity, a
decrease far in excess of the decline in the market and the oversupply
caused by the expansion of competing nitrophosphate fertilizer production.
Imports of phosphoric acid (or phosphate fertilizer) from Morocco (in particular)
will have to be brought in to meet the needs.
But the result will be a surge in pollution in Morocco.
The flood of highly polluted phosphoric gypsum is being pumped, untreated,
straight into the Atlantic Ocean. Thus closures in Western Europe have
only resulted in a shift of pollution to Morocco. In the end the environmental
cause has gained nothing.
This example illustrates the dubiousness of transnational
corporations accepting "environmental responsibility" and choosing
not to move when confronted by tighter environmental legislation in the
North. Tighter environmental measures there, combined with the continuing
absence of international legislation, only makes the South more attractive.
These same transnationals claim only to be able to take on their environmental
responsibility in the continued absence of international legislation.
We may therefore conclude that while the differences
in environmental policy between Northern and Southern countries is seldom
a motive for transferring production, it is the lack of environmental motivation
in the closing down of company activities that indicates the inadequacy
of the environmental policy. If governments in the North will significantly
tighten environmental regulations, which truly attempt to solve environmental
problems, this will result in the transference of polluting activities
to the South. This underlines the need for international environmental
legislation.
Countries in the South are largely dependent
on foreign capital for investment in economic enterprises. In the case
of large infrastructural projects or major direct investments in mining
or processing, transnational companies are always involved. This is certainly
the case for huge projects which go beyond the financial capacity of the
country, and is usually demanded by international lending agencies such
as the World Bank, who never fully
finance development projects but require additional investments by the
actual operating company as well as their technical and organizational
expertise. It is almost inevitably a transnational corporation that can
meet these financial, technical and organizational demands. Large investment
programmes in mining or basic industry is therefore always a complex structure
consisting of national governments, international banks and transnational
corporations, who negotiate their contributions based on their individual
interests in the project.
The World Bank
usually coordinates the search for finance, the Third World country is
usually the project applicant in search of money and expertise to stimulate
economic development, while the transnational is the potential investor
in search of profit. If the Third World country has a lot to offer, for
example an abundance of natural resources and favourable government subsidies,
an attractive cooperation agreement and cheap energy supplies, this will
improve its bargaining position and it will be able to make far-reaching
demands, for example concerning local content in production, local employment
and skills transfer and so forth.
In the past thirty years, several large
hydro-electricity projects have been established in Third World countries,
for example in Surinam, Ghana, Indonesia, Venezuela and more recently Brazil.
The countries involved aimed to use this type of electricity production
to stimulate long-term economic development. Because of the massive investment
required for by the construction of a dam, a reservoir and power station,
this sort of project is only viable if its entire output is purchased from
the very start, an impossible condition for most developing countries where
per capita electricity consumption is usually very low. The sorts of business
activities that are stimulated by a hydro-electric plant are not present
and can only be built up slowly if electricity tariffs are not too high.
But a modern aluminium smelter with a capacity of 200,000 tonnes per year
easily consumes 310 Megawatts of electricity and is therefore a perfect
consumer. In most cases, an aluminium industry therefore becomes a precondition
for launching electricity production projects in the Third World. The two
go together like Siamese twins.
The large aluminium corporations often negotiate
the establishment of one aluminium smelter in various countries
at the same time, thus creating a powerful negotiating position for themselves.
In many cases they are able to force the electricity tariffs down to -
or under - the cost price by pitting countries against each other.
Often, however, the disadvantages of combined hydro/aluminium
projects are greater than the advantages. The income from export and the
increased employment, which undoubtedly have repercussions on the economy,
have to be weighed against the destruction of the natural environment caused
by flooding huge areas of land, salinification in downstream areas, reduction
in soil fertility due to decreased silt deposits, more water-related illnesses
(such as bilharzia and malaria) and a reduction in fishing harvests. The
indigenous population is usually forced to re-settle with little or no
compensation. Moreover, this sort of project usually leads to debts lasting
30 to 50 years and capital goods and services (repairs/maintenance) usually
have to be imported. Often, corporations are able to profit from tax perks
and, in many instances, they are free to repatriate their profits.
Numerous investment projects have shown that the
negotiation structure involving government, international banks and transnational
corporations takes insufficient account of the interests of local population
groups and the natural environment. From the economic point of view, the
value of large scale projects for economic development has been the subject
of criticism for many years. In the 80's environmental groups and interested
groups of local and indigenous populations added their criticisms.
This has focused particularly at the World
Bank as external financier. As a result of which the World
Bank altered its project review procedures. An examination of projected
environmental consequences of the investment is now standard procedure.
It is also directed at the governments concerned. But interest in the environment
and associated problems of poverty usually have to give way to economic
interests. The interests of the local population are often parallel to
those of the environment. Only in unusual situations, often when there
is an environmental scandal, does the role of the transnational come under
fire. The powerful position of the international companies in tripartite
negotiations with banks and governments is almost never the subject of
discussion.
While systematic relocation of polluting production
processes to "pollution havens" does not occur, there is a relative
transference or shift. We see an increase in the share of the South in
various industry branches - including branches which are known for their
large scale environmental pollution. A faster growth of these industries
in the South than in the North is combined with an increase in the demands
placed on natural resources, with large negative consequences and risks
for the local environment and public health.
Transnational corporations are also involved in
rapid expansion in some of the countries in the South. Through their tremendous
negotiating power, they are usually able to demand extremely favourable
location and investment conditions. Almost without exception, they are
unwilling to apply the stricter environmental laws of the parent country
to their location in the South, where laws are less demanding or law-enforcement
less effective. In other words transnational corporations adapt themselves
to the lowest pollution standards in their investment behaviour. They do
not create an example for the surrounding business culture. There is presently
no international legislation to correct these tendencies.
Comments and questions are welcome:
CONTRAST Advies - Milieu
Sint Ansfridusstraat 39
3817 BE Amersfoort
The Netherlands
Tel: +31-33-4652806
Fax: +31-33-4659711
Back to the table of contents
Back to the homepage of CONTRAST Advies - Milieu