Competitiveness and environmental qualitv J
__ The competitive position of U S . industry in the world market represents the most serious long-term problem afflicting the U S . economy. Recessions will come and go. hut as the world moves to a global economy, the U S . competitive position will be critical to our economic well-being. Countries that have lost their competitive edge, such as Great Britain, will have a lower national income than other Western nations. The ability of US. firms to compete will be based heavily on developing and maintaining strong positions in certain domestic markets, the quality of the US. labor force and educational system, the success of technological development, and the ability of our firms to upgrade quality. The determinants of a competitive edge are clearly set forth in a brilliant hook, The Competitive Advontage of Nations. by Michael Porter of the Harvard Business School. Porter concludes that true success in global markets flows from innovation sparked by competitive domestic markets, availability of discriminating customers, and overcoming of short-term obstacles. Countries seeking true competitive advantage must aim for quality and service, not rely on low-cost labor or natural resource advantages. Porter does not believe higher environmental costs threaten the competitive position of the United States, but rather that they stimulate innovation. Porter’s view is not the conventional wisdom among economists
and business people, some of whom argue that environmental expenditures add to the cost of U S . goods. reducing their competitiveness in international markets. Proponents of this view conclude that the United States should impose less stringent standards or that other nations should he cajoled into establishing higher environmental standards. Economic models These views are buttressed by macroeconomic models that show poor economic performance caused by the imposition of environmental standards. But these models do not take into account the benefits of reducing the exposure of people and ecosystems to pollution. [See Regulatory Focus, Oct. issue, p. 1685.1 For example, macroeconomic models portray production of cigarettes as a positive economic contrihution, whereas measures to control unhealthy air pollutants are portrayed as a reduction to economic growth. This portrayal is particularly ironic because U S . health costs are fast spiralling out of control, resulting in a significant reduction in productivity. The “productive” activity of producing cigarettes is not helping the matter, whereas reduction of air pollution is. I am not suggesting that cigarette production be banned, but we should account for its costs, just as we need to account for environmental benefits. There is no way to correctly account for all the environmental benefits that flow from environmental requirements. We can only infer that the benefits must he close to or greater than costs, because the highest environmental expenditures, by far, are incurred in the countries with the healthiest economies. On the margin, environmental costs may adversely affect trade for a few firms in a few industries, particularly in the extractive industries. The question is whether the worldwide concern over the environment will help or hurt the Unit-
0013-936W91/0925-1993$02.50/00 1991 American Chemical Society
ed States’ competitive position in the long term. According to Porter’s thesis, tight environmental standards should help. Over the years. U S . firms have developed technologies and services to characterize environmental problems and clean them up. Currently, the United States is far ahead of most other countries in providing environmental products and services. The U S . environmental market has all the characteristics that should lead to global success, including discriminating customers, fierce domestic competition, and a well-trained work farce. What the government can do What, if anything, should the government do to promote environmental markets in the future? First a n d foremost, the government should provide leadership in international environmental activities and aggressively support domestic environmental programs. As long as U S . standards represent the “wave of the future,” development of a domestic environmental control market should enhance export possibilities. Second, support for R&D and testing of domestic technology should help bring new products and technologies on line. Third, the government should positively promote exports to help get U S . expertise in front of potential customers. If the Michael Porter thesis is correct, the United States has a tremend o u s opportunity to develop a strong competitive position for environmental products and services. Considering the prize-a market estimated at $200 billion and growing-it is hard to ignore the allure of foreign environmental markets. Alvin L. Alm is director and senior vice-presidentfar energy ond the environment for Science Applications International Carp., a supplier of hightechnology products a n d services related to the environment, energv, heolth, and nationol security.
Environ. Sci. Technol.. Vol. 25, No. 12. 1991 1993
