Environmental impact of trade liberalization and exchange rate policy on industrial water pollution and groundwater depletion

• Main Authors: Inocencio, Arlene B., David, Cristina C., Gundaya, Debbie M.
• Format: text
• Published: Animo Repository 1999
• Subjects: Foreign exchange rates—Environmental aspects—Philippines; Free trade aspects—Environmental aspects—Philippines; Water—Pollution—Philippines; Manufacturing industries—Philippines; Water use—Philippines; Groundwater—Philippines; Economics; Environmental Studies
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/6879
• Institution: De La Salle University

This study aims to link changes in trade and exchange rate policy to the environment by identifying the environmental damage likely to be aggravated by the policy change through its effects on water usage. Specifically, it examines whether and in what way trade liberalization and exchange rate policy will affect water pollution and groundwater depletion. Results of a partial equilibrium model, which relates changes in industry outputs to changes in their effective rates of protection (EPR) and changes in the real exchange rate, are linked to firm level data for Metro Manila and Metro Cebu on water pollution, water use intensities and source of water which aggregated into 3 or 4 PSIC levels. Simulation of the impact of trade liberalization with flexible exchange rate policy shows that overall water pollution intensities for the manufacturing sector increase as evidenced by sectoral effects which show that outputs of industries with higher pollution intensities such as food, beverage, and tobacco manufacturing, wearing apparel and footwear, leather and leather products, wood and wood products, and wood furniture increase. Since these industries are also generally water intensive, which means that increases in their outputs will result not only in increased water pollution but also in much increased total usage, there will be added pressure on the supply of water. In addition, given the fact that groundwater is already being mined both in Metro Manila and Metro Cebu and that groundwater extraction is practically unregulated and unpriced, water usage and source patterns indicate that even with trade liberalization with flexible exchange rate policy, groundwater depletion will continue.