The Environment
The Environment
An issue that has captured the attention of the world in recent years is the environment. Pollution of the air, land, and sea clearly poses a threat to the future of the planet, and governments, corporations, and citizens are concerned about where we are and where we are heading. The opening of Central and Eastern Europe has unmasked terrible environmental damage from centrally planned economies that operated with no real thought as to the future of the environment. The growth in Mexican industries along the U.S. border has brought with it increased air, land, and water pollution. A key irritant between the U.S. and Canada is the problem of acid rain that results from air pollution in the United States. The oil spill of the Exxon Valdez in Alaska highlighted the potential problems of transporting oil in supertankers. The total disregard of Iraq's Sadaam Hussein for the environment was demonstrated by the detonation of oil wells and the mass spilling of oil into the Persian Gulf during the Gulf War in 1991.
People are clearly concerned about the environment. In a poll conducted frequently by the New York Times/CBS, the public is asked if "protecting the environment is so important that requirements and standards cannot be too high, and continuing environmental improvements must be made regardless of cost." When the question was asked in September 1981, 45 percent agreed and 42 percent disagreed. In June 1989, 79 percent agreed and only 18 percent disagreed.46
In a recent Conference Board study, the following issues were identified by U.S. managers as the most important:
1. Worker health and safety;
2. Clean air (pollution from stationary sources);
3. Hazardous and toxic chemical waste disposal;
4. Acid rain;
5. Toxic solid waste disposal.
In the same survey, two other issues were raised by Canadian managers: clean water (surface water contamination) and the Greenhouse effect (global warming). Clean air was ranked third by the Canadians, whereas hazardous and toxic chemical waste disposal was ranked second by both Canadian and European managers.47
The problem with environmental legislation is that each country is going off in its own direction, and there are significant differences in the way different countries are dealing with environmental issues. The problem is especially acute in the developing countries, where some of the worst environmental damage is taking place and where laws tend to be the most lax. As a result, companies might be tempted to locate production facilities in countries where environmental laws are weak in order to save costs.
However, many MNEs are also among the most environmentally responsible in the world as they redesign manufacturing processes to be more efficient in the use of inputs as a means of driving down costs. An example is DuPont, the U.S.-based chemical firm. DuPont voluntarily spends approximately $50 million a year on environmental projects beyond what is required by law, and its goal is zero pollution in all activities.48 Management found that it could actually reduce costs by designing production processes to be more environmentally sound.
It is clear that corporations are responding to private environmental groups as well as self-interest in attacking environmental issues. However, global efforts are occurring in places like the United Nations as countries meet to discuss and coordinate efforts. The World Bank, for example, examines the environmental impact of each of the projects that it funds, primarily in developing countries. In June 1990, environment ministers from 93 countries agreed to phase out the production and use of chlorofluorocarbons and several other chlorine-based and bromine-based chemicals by the end of the century. In addition, a cross-national agreement was reached on ways to control the cross-border movement of hazardous wastes. Even though national efforts are important, international cooperation can also be beneficial.
LOOKING TO THE FUTURE
Regional economic integration will continue at a rapid pace. Even
though nationalism will keep the European Community from becoming a United States of Europe, there will be significant economic harmonization in the years to come. However, there are a number of important problems, such as the harmonization of taxation, that will not be solved by December 31, 1992. Therefore, Europe 1992 needs to be looked at as a process, not a specific date. A key issue to watch is the potential development of one European currency, which is championed by the French and opposed by the British. Another key issue that relates to the EC is the acceptance of the Central and Eastern European countries and the place of the Soviet Union in the "European House."
Some very exciting new areas of cooperation may come out of the Americas. The closing case, which discusses a North American Common Market, illustrates some of the problems and potential benefits that will accrue to a closer Canada-United States-Mexico. At the same time, the rest of Latin America will find that economic cooperation will be essential to their continued peace and prosperity. The ability of the democratically elected governments to remain in power and to develop the democratic tradition within their, countries should enhance regional cooperation.
The most unstable area for the future will be commodity prices. As those prices remain low, the exporting countries will have difficulty earning enough foreign exchange to service foreign debt and modernize. Conversely, while most of the major oil-consuming countries have cut down on oil consumption as a percentage of GNP, high oil prices can have a devastating impact on their economic growth. Although the recession of late 1990 and 1991 reduced the demand for oil and helped hold down prices, the fear was that any significant price increases would touch off an inflationary spiral that would damage economic recovery. It was estimated in 1990 that in the United States, each $1 drop in the price of a barrel of crude oil would cut the cost of gasoline by more than $2 billion per year and cut the trade deficit by $3 billion.49 Obviously, a price increase would cause the opposite effect in the short run.
An issue that has captured the attention of the world in recent years is the environment. Pollution of the air, land, and sea clearly poses a threat to the future of the planet, and governments, corporations, and citizens are concerned about where we are and where we are heading. The opening of Central and Eastern Europe has unmasked terrible environmental damage from centrally planned economies that operated with no real thought as to the future of the environment. The growth in Mexican industries along the U.S. border has brought with it increased air, land, and water pollution. A key irritant between the U.S. and Canada is the problem of acid rain that results from air pollution in the United States. The oil spill of the Exxon Valdez in Alaska highlighted the potential problems of transporting oil in supertankers. The total disregard of Iraq's Sadaam Hussein for the environment was demonstrated by the detonation of oil wells and the mass spilling of oil into the Persian Gulf during the Gulf War in 1991.
People are clearly concerned about the environment. In a poll conducted frequently by the New York Times/CBS, the public is asked if "protecting the environment is so important that requirements and standards cannot be too high, and continuing environmental improvements must be made regardless of cost." When the question was asked in September 1981, 45 percent agreed and 42 percent disagreed. In June 1989, 79 percent agreed and only 18 percent disagreed.46
In a recent Conference Board study, the following issues were identified by U.S. managers as the most important:
1. Worker health and safety;
2. Clean air (pollution from stationary sources);
3. Hazardous and toxic chemical waste disposal;
4. Acid rain;
5. Toxic solid waste disposal.
In the same survey, two other issues were raised by Canadian managers: clean water (surface water contamination) and the Greenhouse effect (global warming). Clean air was ranked third by the Canadians, whereas hazardous and toxic chemical waste disposal was ranked second by both Canadian and European managers.47
The problem with environmental legislation is that each country is going off in its own direction, and there are significant differences in the way different countries are dealing with environmental issues. The problem is especially acute in the developing countries, where some of the worst environmental damage is taking place and where laws tend to be the most lax. As a result, companies might be tempted to locate production facilities in countries where environmental laws are weak in order to save costs.
However, many MNEs are also among the most environmentally responsible in the world as they redesign manufacturing processes to be more efficient in the use of inputs as a means of driving down costs. An example is DuPont, the U.S.-based chemical firm. DuPont voluntarily spends approximately $50 million a year on environmental projects beyond what is required by law, and its goal is zero pollution in all activities.48 Management found that it could actually reduce costs by designing production processes to be more environmentally sound.
It is clear that corporations are responding to private environmental groups as well as self-interest in attacking environmental issues. However, global efforts are occurring in places like the United Nations as countries meet to discuss and coordinate efforts. The World Bank, for example, examines the environmental impact of each of the projects that it funds, primarily in developing countries. In June 1990, environment ministers from 93 countries agreed to phase out the production and use of chlorofluorocarbons and several other chlorine-based and bromine-based chemicals by the end of the century. In addition, a cross-national agreement was reached on ways to control the cross-border movement of hazardous wastes. Even though national efforts are important, international cooperation can also be beneficial.
LOOKING TO THE FUTURE
Regional economic integration will continue at a rapid pace. Even
though nationalism will keep the European Community from becoming a United States of Europe, there will be significant economic harmonization in the years to come. However, there are a number of important problems, such as the harmonization of taxation, that will not be solved by December 31, 1992. Therefore, Europe 1992 needs to be looked at as a process, not a specific date. A key issue to watch is the potential development of one European currency, which is championed by the French and opposed by the British. Another key issue that relates to the EC is the acceptance of the Central and Eastern European countries and the place of the Soviet Union in the "European House."
Some very exciting new areas of cooperation may come out of the Americas. The closing case, which discusses a North American Common Market, illustrates some of the problems and potential benefits that will accrue to a closer Canada-United States-Mexico. At the same time, the rest of Latin America will find that economic cooperation will be essential to their continued peace and prosperity. The ability of the democratically elected governments to remain in power and to develop the democratic tradition within their, countries should enhance regional cooperation.
The most unstable area for the future will be commodity prices. As those prices remain low, the exporting countries will have difficulty earning enough foreign exchange to service foreign debt and modernize. Conversely, while most of the major oil-consuming countries have cut down on oil consumption as a percentage of GNP, high oil prices can have a devastating impact on their economic growth. Although the recession of late 1990 and 1991 reduced the demand for oil and helped hold down prices, the fear was that any significant price increases would touch off an inflationary spiral that would damage economic recovery. It was estimated in 1990 that in the United States, each $1 drop in the price of a barrel of crude oil would cut the cost of gasoline by more than $2 billion per year and cut the trade deficit by $3 billion.49 Obviously, a price increase would cause the opposite effect in the short run.
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