Trade Reproduces International Inequalities

By Christian Dorninger, Anke Schaffartzik, and Hanspeter Wieland

Through international trade, richer countries do not merely generate a monetary trade surplus, but also appropriate international resources and labour from poorer countries. While this allows high consumption standards, economic growth, and the simultaneous protection of domestic natural resources in some countries, more land for mining and agriculture for exports is being extracted from the local economies in others. As a result, this makes a socially-ecologically sustainable development impossible. Our research team was now able to prove that ecologically unequal exchange was a persistent feature of the global economy from 1990 to 2015. Using environmentally-extended multi-regional input-output modelling, we investigated these structural inequalities in international trade.

Petroleum, iron, livestock fodder, components for vehicle manufacturing, tools for final consumption: Imports have become an integral part of consumption patterns. The production of imported goods and services in high income-countries strongly relies on labour, energy, land, and materials that have to be sourced from somewhere else. Although further production, and ultimately, consumption, would be impossible without these inputs, they generate only a small proportion of the economic value-added that occurs along an entire supply chain. Surprisingly, however, there has not been a scientific study yet that has comprehensively and empirically investigated this “ecologically unequal exchange” on a global scale.

Labour, land, resources: preconditions of international trade

Where is how much labour input needed to produce for export? Which land areas are required for this? How much energy is used? Which material resources have to be extracted through mining, agriculture, and forestry? And above all: Where do these inputs end up directly or indirectly in final consumption? We have empirically answered these questions with the help of raw data on resource use and so-called multi-regional input-output models that map the interdependencies between production and consumption within and between individual economies. The results reveal that international trade – and the redistribution of resources that it represents – exacerbates rather than alleviates several inequalities.

Where do money and resources flow?

In trade, money and resources flow in opposite directions: Whoever sells goods gets money for them; whoever wants to buy goods has to pay money for them. However, the fact that some countries – those with higher average per-capita incomes – have specialized in higher-value processing, whereas in others the expansion of raw material extraction is being pushed forward, has led to international asymmetrical flows of money and resources. While the richer countries are net importers of resources and labour and, in global terms, require more energy and land area than they provide, they nevertheless remain net exporters in monetary terms, i.e. they earn more from their exports than they pay for their imports. This is possible because prices for raw materials, land, energy, and labour vary greatly around the world: In 2015, richer countries achieved an average price per unit of exported material resources that was 11 times higher than that of poorer countries. The richer countries also received higher returns for energy and land used for production than poorer countries. For labour, the difference is most obvious: here richer countries received 28 times more return than poorer countries.

Resource appropriation as a foundation for economic growth

The countries with the highest per capita income are also those with the highest resource-based footprints – and are also responsible for the associated environmental impacts. Specifically, in 2015, demand in the richest sixth of the countries in the world was associated with an almost 13 times higher material use than in the poorest sixth. Annual consumption in this richest sixth was associated with an average of about 26 tons of raw material input per capita of which about nine tons per capita came in the form of net imports from poorer countries. The poorest sixth recorded only about two tons of material resource use per capita. For energy, the footprint of the richest sixth was almost 34 times as large as that of the poorest.

Over time, this higher footprint accumulated in a technological, economic, and infrastructural advantage for richer countries, who in turn could acquire more resources in the following years. With these high resource acquisitions and footprints in place, the richest sixth of the countries, accounting roughly for 16% of the world’s population, generated far more value-added in 2015 than all other countries combined. In fact, they accounted for almost two-thirds of global GDP (65%) or $48.5 trillion.

“Catch-up development” – unsustainable and unfeasible

Explicitly or at least implicitly, the richest economies are held up as a model of development. But considering how much their wealth depends on net imports of resources and labour, it must also be clear that not all of the world’s economies can be net importers. A development which some countries have been able to realize for themselves cannot be generalized globally.

The demand for resources is increasing worldwide. Since their availability is naturally limited, new economic systems, technologies, and infrastructures with smaller resource requirements need to be created. However, above all, those structures and relationships that aggravate the international inequalities revealed by this study must be dismantled or dissolved. This would give more “space of material freedom” to poorer countries – whose resource consumption is currently unable to meet basic needs everywhere – while at the same time not increasing the pressure on the environment and future generations.

Image: Maasmondmaritime under a Creative Commons License on Flickr

Christian Dorninger is a postdoctoral research fellow at the Konrad Lorenz Institute in Klosterneuburg, Austria, since January 2020. He has an interdisciplinary background spanning over social ecology, sustainability science, sociology, and international development studies. His research interests include the development and application of methods of human-nature interaction, the sustainability transformation, resource use and decoupling, a biophysical perspective on trade relations, teleconnections, and ecologically unequal exchange. Contact: christian.dorninger@kli.ac.at

Anke Schaffartzik is a senior researcher at the Institute of Social Ecology, Department of Economics and Social Sciences, University of Natural Resources and Life Sciences, Vienna, Austria. Her areas of expertise include social metabolism, global resource use and international trade, the international division of labour, extractivism, material flow accounting, and environmentally-extended input-output analysis. Contact: anke.schaffartzik@boku.ac.at

Hanspeter Wieland is a research associate at the Institute of Ecological Economics, Vienna University of Economics and Business, Austria. His research interest includes industrial ecology, environmental accounting, material flow analysis, environmental-extended input-output analysis, and analytical tools therein. Contact: hanspeter.wieland@wu.ac.at

Source: Christian Dorninger, Alf Hornborg, David J. Abson, Henrik von Wehrden, Anke Schaffartzik, Stefan Giljum, John-Oliver Engler, Robert L. Feller, Klaus Hubacek, Hanspeter Wieland (2020): Global patterns of ecologically unequal exchange: Implications for sustainability in the 21st century. Ecological Economics 179, 106824.