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Outsourcing: implications in a globalized world

Outsourcing: implications in a globalized world

The Magic Nexus team

In this issue we look at the role of outsourcing in European industry. The question is, what role does outsourcing play in the effectiveness of EU policies to reduce greenhouse gases emissions, promote renewable energies, increase recycling and reduce environmental impact of agriculture?

Industrial and agricultural production are often outsourced to countries with lower production and labour costs, and the impacts of these activities are externalised along with production. Outsourcing may be the direct result of policy decisions, such as when a country exports its toxic waste, or may be a secondary effect of decisions taken at firm level, such as relocation driven by labour costs and tax reliefs. Outsourcing is also referred to as displacement by Dryzek (1987), and externalisation, with reference to the concept of externalities in economics (the consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices).

Due to the difficulty of keeping track of externalized activities, they are difficult to measure and are often kept hidden from public view. For example, efforts to increase recycling may not lead to the desired results, as there is little information on what happens to exported waste. In our first article, we explore the question of waste outsourcing by taking China’s recent ban on plastic waste imports as an example. Waste exports draw attention to the fact that waste disposal is costly, requiring a high level of energy and labour resources.

In the case of energy, the challenge is dependence on energy imports. While energy imports are often analysed in terms of energy security, we argue that from a nexus perspective imports also imply outsourcing the production of inputs which are particularly “costly” in terms of resources or labour requirements.

In the case of water, we use the water footprint approach to show how trade of agricultural commodities also implies trade of “virtual water” used to produce fruits and vegetables. The trade of virtual water flows is of interest within Europe, as water-scarce Mediterranean countries are the main exporters of fruits and vegetables to Northern European countries.

These articles are aimed at initiating a discussion on the importance of outsourcing for the study of the nexus. We welcome any comment and contribution to the discussion. You can either use our discussion forum or write to us.

References:

Dryzek, J.S. 1987: Rational ecology: environment and political economy. Oxford: Basil Blackwell