Handbook on Trade and the Environment
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Handbook on Trade and the Environment

Edited by Kevin P. Gallagher

In this comprehensive reference work, Kevin Gallagher has compiled a fresh and broad-ranging collection of expert voices commenting on the interdisciplinary field of trade and the environment. For over two decades policymakers and scholars have been struggling to understand the relationship between international trade in a globalizing world and its effects on the natural environment. The authors in this Handbook provide the tools to do just that.
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Chapter 6: Foreign Direct Investment and Sustainable Industrial Development

Lyuba Zarsky


Lyuba Zarsky Introduction In August 2005, some 300 leaders of the world’s biggest corporations gathered in Sydney for a conference convened by the world’s richest man: billionaire, publisher and one-time US presidential candidate Steven Forbes. While hundreds of noisy anti-globalization protestors climbed fences outside the Sydney Opera House, a visibly irate Forbes told an evening television reporter that global capitalism was not the problem but the solution to global poverty. Echoing neoliberal orthodoxy, Forbes proclaimed that, for developing countries, foreign investment by multinational corporations is ‘the ladder to development’ (emphasis in original). Is he right? This chapter probes the interface between foreign direct investment (FDI) and development – or more precisely, sustainable industrial development. The crisis of global ecosystems, most pointedly threats of global warming, suggests that ecologically unconditioned development paths are not economically viable (Millennium Ecosystem Assessment, 2005). On the other hand, the profound crisis of global poverty makes urgent the quest for sustainable livelihoods. Despite recent attention to the environment, development theory and policy focus mainly on the role of FDI in increasing economic growth. On the other hand, environmentalists tend to assume that FDI delivers economic benefits and focus on environmental externalities. The concept of sustainable industrial development used in this chapter is innovative in two ways.1 First, it defines a development path based on the integration of economic and environmental objectives, with the latter defined as a reduction in the ecological ‘footprint’ of industrial growth. Second, it defines the key economic objective not...

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