Ecological Economics 70 (2011) 1981–1990

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Ecological Economics

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Analysis

On the North–South trade in the Americas and its ecological asymmetries

Pablo Muñoz a,b,⁎, Rita Strohmaier c,⁎⁎, Jordi Roca d

a IHDP-Secretariat, United Nations University, Hermann-Ehlers-Str. 10 53113 Bonn, Germanyb Institute of Environmental Science and Technology, Autonomous University of Barcelona, 08193 Barcelona, Spainc Department of Economics, University of Graz, Universitätsstrasse 15/F4 A-8010 Graz, Austriad Department of Economic Theory, University of Barcelona, Barcelona, Spain

⁎ Corresponding author at: IHDP-Secretariat, UnitedEhlers-Str. 10 53113 Bonn, Germany. Tel.: +49 228 815 06

E-mail addresses: munoz@ihdp.unu.edu (P. Muñoz)(R. Strohmaier), jordi.roca@ub.edu (J. Roca).

URL: http://www.ihdp.org (P. Muñoz).

0921-8009/$ – see front matter © 2011 Elsevier B.V. Aldoi:10.1016/j.ecolecon.2011.05.012

a b s t r a c t

a r t i c l e i n f o

Article history:Received 3 March 2011Received in revised form 13 May 2011Accepted 14 May 2011Available online 30 June 2011

Keywords:North–South tradeWorld-system theoryInternational tradeMaterial flow analysis (MFA)Unequal exchangeLatin-America

There has been a long and intensive debate within the scientific community about the role of internationaltrade in the development of countries. During the last decades, the focus of attention hasmoved from the pureeconomic level to the environmental aspects of international trade. Establishing a simplified system of North–South trade for one reference period (2003), this paper attempts to test empirically the extent of potentialasymmetries with regard to extracted material flows, and contrasts the results with the economic benefitsfrom trade (in terms of value-added). The South is thereby represented by a selection of Latin Americancountries (Brazil, Chile, Colombia, Ecuador and Mexico), the North comprises one of their main commercialpartners, the United States. At the methodological level, a multi-regional input–output analysis is used as thetool of investigation. Results generally support the hypothesis that the South was feeding the North's societalmetabolism. South–North material exports were 1.6 times larger than North–South material exports,resulting in a net deficit for the South of 324 million tons. Moreover, material intensity of exportedcommodities from the South was twice as high as that from the North. It is worth highlighting, however, thatpart of the North-South hypothesis fails for the sample of countries since the larger part of the economicsurplus has remained in the South, contrarily to what would have been expected.

Nations University, Hermann-28; fax: +49 316 815 0620., rita.strohmaier@uni-graz.at

1 Here representeJapan, South Korea,

2 By less dynamiresources such as oileffects on employme

l rights reserved.

© 2011 Elsevier B.V. All rights reserved.

1. Introduction

Commodity and service exchange on a global scale has beenexperiencing remarkably positive growth rates in the last half century.While the global economy almost quadrupled, world trade grew by afactor of 12 (UNEP/IISD, 2005). There is a large body of economictheories, which, in their basic statements, claim that international tradeleads to a rise in total production and consumption, and consequently, toan improvement in welfare for those countries involved in the tradesystem — thereby fostering globalization efforts at the political level.Final goods and services domestically produced for global marketscertainly induce value-added across the different industries due to theproduction chain of commodities and services. Nonetheless, trueeconomic development should be assessed not only in terms ofaggregate income, but should also take into account distributional issuesacross different income groups (wheremarket performance hasworkedpoorly in the case of low and middle income economies (UNEP/IISD,2005)), and should incorporate the physical (environmental) effects ofeconomic activities as well. The physical requirements of export

products can sometimes represent an important loss of natural assets.This occurs not only through the natural resources provisioned to theeconomy, but also through the potential decline of ecosystem servicesassociated with the ecosystem under alteration.

Globalfigures show that theNorth,1which in 2005 represented 15%oftheworld's population and 57% of theworld's GDP (World Bank, 2010) atPurchasing Power Parity (PPP), has extracted in its territory only 32% ofthe materials removed worldwide. This implies that the rest of the worldhasextracted68%of thematerialswhile creating43%of theworld'sGDPatPPP for 85% of the global population. Linking the consumption andproduction activities of nations by international trade facilitates anunderstanding of the extent to which Northern countries reallocatematerial-intensive stages of production to the South, characterized byrelatively larger reserves of natural resources and lower environmentaland labor standards, in order to sustain the achieved life style. Theunderlying hypothesis in this work is that developing countries mainlyspecialize in the first production phase, extraction. This phase normallyexhibits high environmental pressures and low value-added, sinceprimary commodities tend to be less dynamic2 as compared to secondary

d by West Europe, Canada, United States, Australia, New Zealand,and Singapore.c, we refer here to the fact that in many situations, naturalor copper are extracted and exported, triggering off relatively lownt due to the low degree of downstream processing of materials.

1982 P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

or tertiary ones.Meanwhile, developed countries largely focus on thefinalstage of the productive process, where lower environmental pressuresand higher value-added take place.3 In this way, developed countriesmaintain higher environmental quality, while displacing materialintensive production beyond their geographical borders. Thus, the tradesystemmay lead to ecological asymmetries between theNorth and South.This paper attempts to empirically investigate the degree to whichenvironmental burden and economic surplus in the South is connected toconsumption activities in the North. The analysis is carried out in asimplified system, with one Northern region and five Southern countries.The South region comprises a group of Latin-American countries (Brazil,Chile, Colombia, Ecuador and Mexico); meanwhile the North isrepresented by one of their main commercial partners, the United States.The environmental pressures are expressed in terms of extractedmaterialflows of each region –what is usually called the RawMaterial Equivalents(RME)of international trade (see Eurostat, 2001;Weisz et al., 2004; 2007)– while the value-added created across the countries measures theincome that is generated as a consequence of the North–South trade.

There exists a growing literature on trade and environment usingMaterial Flow Analysis (MFA) to measure the physical dimension ofinternational commodity exchange (for studies on the Latin-Americanregion see, e.g., Giljum, 2004; Giljum and Eisenmenger, 2004;Gonzalez-Martinez and Schandl, 2008; Muñoz et al., 2009; Perez-Rincon, 2006; Russi et al., 2008; Vallejo, 2010). In the present paper,we combine MFA with Multi-Regional Input-Output (MRIO) Analysis.This tool does not only allow estimating direct and indirect materialflows involved in trade, but also differentiating between the sourceregion and the receiving region of the exchanged commodities.

The article is organized as follows: Section 2 mainly reviews twoperspectives in international trade, conventional trade theory andworld-system theory, and briefly sketches the economic tradestructure of the country sample. In Section 3, methodological aspectsconcerning MRIO and data preparation issues related to theconstruction of a multi-regional input–output table (extended tothe environment) are set out. Sections 4 and 5 present the results andconclusive remarks respectively.

6 One should point out that this direct compensation from winners to losers is only a

2. Perspectives in Trade and Environment

At a theoretical level, the most prominent economic arguments forinternational trade are captured in the theory of comparativeadvantage and the factor-proportion approach. These concepts, intheir basic statements, claim that if relative commodity prices differamong economies, international trade could lead to gains for allparticipating countries; namelywhen factors of production (e.g. labor,capital and natural resources) are reallocated to those commoditiesthat can be produced at lower relative costs in comparison to the tradepartners.4 Correspondingly, a country should specialize in theproduction of the commodity which can be supplied relativelycheaper for domestic as well as for foreign demand; while it shouldimport the other commodities from countries which have acomparative advantage in producing them. Thus, optimizing behaviorof the agents with respect to international trade leads to an efficientreallocation of a production factor among its possible uses, increasingits productivity and fostering specialization.5 It may well be the case

3 For a systemic analysis of the relation between the environmental impacts ofproduction along the supply chain and accumulated value-added, see Clift (2003).

4 More precisely, applying David Ricardo's theory of comparative advantage to atwo-country-two-commodity-framework where goods are solely produced by meansof labor, international trade would lead to an increase in labor productivity in botheconomies (given that the international price ratio is between the national ones). TheHeckscher–Ohlin model distinguishes between different factors of production, i.e.capital and labor, and shows that trade is beneficial, if countries specialize in theproduction of that good which uses more of the relatively abundant input factor.

5 This theory, mathematically proven, is valid only for a full set of assumptions. For adiscussion, see Ekins et al. (1994).

that for some industries trade turns out to be disadvantageous; butwinners should be able to offset their losses.6 The aggregated benefitson the macro level make international trade superior to the state ofautarky, where all commodities are produced and consumed withinthe borders of one country.

Whether or not international trade stimulates economic growthhas been a widely debated question in economic literature, especiallyas trade between countries at different levels of development isconcerned. Depending on the key variable, trade could act as an“enemy”, a “handmaiden” or even an “engine of growth” (Rauch,2008). Relevant for the latter is the so-called exports-led growth(ELG) hypothesis, where exports are the driving force for rising per-capita income. The reason may be found in either demand or supply.From the demand side, it is expected that foreign consumption willincrease domestic production, owing to the large size of the globalmarket. On the other hand, supply side arguments are based onincrements in efficiency due to the reallocation of factors ofproduction and economies of scale due to the wider market. Furtherimprovements in productivity may be caused by the transfer ofdisembodied and embodied knowledge (i.e. technology), as well ascapital goods (see Giles and Williams, 2001, for a literature reviewabout the ELG hypothesis). This hypothesis has been largelysupported by the growth records of newly industrializing Asiancountries — in particular, Hong Kong, Singapore, Taiwan, and SouthKorea (World Bank, 1993). Empirical evidence based on econometrictools was also found, for instance, in the case of Chile (Siliverstovs andHerzer, 2007). Conversely, the prime export of agricultural andmining products is assumed to deteriorate growth for variousreasons: On the one hand, productivity increases more rapidly forthe manufacturing sector due to potential knowledge spillovers (seeMatsuyama, 1992, for a theoretical approach). If a country thusspecializes in primary export, labor and capital are shifted from themore productive manufacturing sector to the stagnant agriculturesector. On the other hand, the latter industry is also more exposed touncertainty, as prices and supplied quantity of primary productshighly fluctuate. This in turn keeps investment demand at a low level(Siliverstovs and Herzer, 2006).

When it comes to the effects of trade on the environment, theviews remain ambiguous. Under a set of assumptions, internationalexchange of commodities can have positive side-effects for theenvironment: Firstly, an increase in income may raise the demandas well as economic resources for environmental protection. From thisperspective, the environment is largely treated as any othercommodity with a positive income elasticity.7 Secondly, a transferof environmentally friendly technology between the trading countriescould take place. Thus, the relationship between environment andtrade could be described as a virtuous circle in which trade leads to anincrease in income and technological progress, which will eventuallysupply environmental protection, while the environment will providethe resources for economic growth.8

Amore critical viewof the relationship between trade and growth andits environmental consequences canbe found in thesociological literature,in the scope ofworld-system theory. From this perspective, societies formpart of a world system, which is “a large axial division of labor, with

potential one, in reality, it hardly takes place.7 Two remarks on this approach should be pointed out: On the one hand,

‘environmental quality’ is a public good and people can not directly decide toconsume more of this good; in order to maintain and increase the quantity of a publicgood, political intervention (for instance by taxes or regulations) is necessary. On theother hand, it is not clear at all why people with higher income would pay forenvironmental quality in those frequent cases in which those affected by environ-mental degradation are other people (living in other countries or future generations).See Roca (2003).

8 It should be noted, however, that a rich country can also diffuse to other countriesenvironmentally problematic technologies which could be cheaper in monetary termsespecially in countries with weak or inefficient environmental regulations.

Fig. 1. Import (m) and export (x) structures for Brazil (Br), Chile (Cl), Colombia (Co), Ecuador (Ec), Mexico (Mx), and the United States (US) in 2003. Note that light industry nec.comprises the sectors textiles, furniture, paper, glas and electronics, whereas the sectors construction, transport equipment, machinery, chemicals, plastics, metals and refineryconstitute heavy industry nec. Sectoral comparisons between countries should be carefully interpreted due to countries' dissimilar commodity classifications. Nevertheless, highaggregation levels as presented in this figure tend to match.Source: Supply and use tables from the national statistical agencies, own calculation.

1983P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

multiple political centers and multiple cultures” (Wallerstein, 2004). Theworld system is structuredon thebasis of “apowerhierarchybetween thecore and periphery, in which powerful and wealthy core societiesdominate and exploit peripheral societies” (Chase-Dunn and Grimes,1995). In addition, exchange between parts leads to a transfer of surplus-value9 from the periphery to the core, and consequently, to an unequalexchange between them. This unequal exchange has been taking place, atleast, since theestablishmentof themodernworld system in the sixteenthcentury (Wallerstein, 2004).

Moreover, periphery exploitation does not only take place throughsurplus-transfer with a strong emphasis on cheap labor transfer, butalso involves a series of ecological issues. In terms of trade and theenvironment, world-system theory points out that the globaldistribution of environmental deterioration is structurally determined(Hornborg, 1998). International trade leads peripheral countries to anappropriation of their natural resources by core countries, and to ahigh environmental deterioration. Hence, globalization does not onlystipulate an increasing specialization of labor, but also forces spatialseparation of extraction and consumption, and a globally unevendistribution of associated environmental pressures facilitated by themodern international transport system (Bunker, 2007).

The uneven distribution of environmental issues can be described interms of burden allocation as well as resource appropriation. As concernsthefirst, different environmental standards across the globemay cause anunequal distribution of pollution-intensive activities. This fact usuallyresults in themigration of dirty industries from the core to the periphery,and subsequently, constitutes a burden reallocation towards developingcountries, as investigated by those studies testing the pollution havenhypothesis (see Levinson and Taylor, 2008). Resource appropriation may

9 The explanation of surplus-value transfer basically relies on the Prebisch–Singerhypothesis. See, for example, Prebisch (1981).

be another result of international trade, which, evidently, has a longhistory, beginningwith themodernworld systemfive hundred years ago.In those times, resource appropriation took place mainly in the form ofhigh exchange value per kilogram (Martínez-Alier, 2007). Luxury goods,such as silver and gold from Potosi (Bolivia) and Zacatecas (Mexico), areearly examples for trade (Galeano, 2008). Nowadays, commodityexchange involves high quantities spanning many different commoditygroups. From an ecological point of view, many Southern countries stillprovide natural resources (in terms ofmaterials and energy) for Northerncountries tomaintain and develop their socio-economic metabolism (seePerez-Rincon, 2006). However, the mechanisms by which resourceappropriation takes place have been changing over time. While inmercantilism it was largely articulated by power and force, in the currentworldmarket system commodity and factor prices are themechanism bywhich the center(s) of the world appropriates natural resources andreallocates burden (Hornborg, 1998). It is mainly by this means thatNorth–South commodity exchange leads to asymmetries in physical andmonetary terms for various peripheral countries. Nowadays the exchangeusually takes place through the export of primary commodities by theperiphery, involving large physical quantities at prices that do not coverfull productioncosts (MuradianandMartinez-Alier, 2001);while thecore,commonly specialized in final production stages (where secondary andtertiary commodities are produced), ends up in high commodity pricesand small material flows. Therefore, the periphery needs to supply muchlarger physical flows for the same amount of value-added.

2.1. Trade Structure of the Selected Countries

For the selected countries, in order to assess the economicimportance of primary products for international trade, data forexports and imports are compared at a sectoral level. Fig. 1 presents thestructure of exports and imports for Brazil, Chile, Colombia, Ecuador,

Table1

Sche

matic

presen

tation

ofthemulti-reg

iona

lsup

plyan

dus

etableforBrazil(B

r),C

hile

(Cl),C

olom

bia(C

o),E

cuad

or(E

c),M

exico(M

x),the

UnitedStates

(US)

andtherest

oftheworld

(w).VA=

value-ad

ded,

DE=

domesticex

traction

.Ada

pted

from

Lenz

enet

al.(20

04)an

dInom

ataan

dOka

moto(2

006)

.

Interm

ediate

deman

dFina

lde

man

dTo

talou

tput

Region

BrCl

CoEc

Mx

US

wBr

ClCo

EcMx

US

w

Zy•

Bry•

Cly•

Coy•

Ecy•

Mx

y•US

y•w

yx

5511

073

7359

5947

6079

7965

6565

651

11

11

11

1

n inBr

n coBr

n inCl

n coCl

n inCo

n coCo

n inEc

n coCo

n inMx

n coMx

n inUS

n coUS

n inw

n cow

n yBr

n yCl

n yCo

n yEcn yM

xn yU

Sn yw

Br55

n inBr

0VBr

;Br

00

00

00

00

00

00

00

00

00

00

xBr

110

n coBr

UBr

;Br

0U

Br;Cl

0U

Br;Co

0U

Br;Ec

0U

Br;M

x0

UBr

;US

0U

Br;w

0yB

r;Br

yBr;Cl

yBr;Co

yBr;Ec

yBr;Mx

yBr;US

yBr;w

yBr

qBr

Cl73

n inCl

00

0VCl;Cl

00

00

00

00

00

00

00

00

00

xCl

73n c

oCl

UCl;Br

0U

Cl;Cl

0U

Cl;Co

0U

Cl;Ec

0U

Cl;M

x0

UCl;US

0U

Cl;w

0yC

l;Br

yCl;C

lyC

l;Co

yCl;E

cyC

l;Mx

yCl;U

SyC

l;wyC

lqC

l

Co59

n inCo

00

00

0VCo

;Co

00

00

00

00

00

00

00

00

xCo

59n c

oCo

UCo

;Br

0U

Co;Cl

0U

Co;Co

0U

Co;Ec

0U

Co;M

x0

UCo

;US

0U

Co;w

0yC

o;Br

yCo;Cl

yCo;Co

yCo;Ec

yCo;Mx

yCo;US

yCo;w

yCo

qCo

Ec47

n inEc

00

00

00

0VEc;Ec

00

00

00

00

00

00

00

xEc

60n c

oEcU

Ec;Br

0U

Ec;Cl

0U

Ec;Co

0U

Ec;Ec

0U

Ec;M

x0

UEc;US

0U

Ec;w

0yE

c;Br

yEc;Cl

yEc;Co

yEc;Ec

yEc;Mx

yEc;US

yEc;w

yEc

qEc

Mx

79n i

nMx

00

00

00

00

0VMx;Mx

00

00

00

00

00

00

xMx

79n c

oMx

UMx;Br

0U

Mx;Cl

0U

Mx;Co

0U

Mx;Ec

0U

Mx;Mx

0U

Mx;US

0U

Mx;w

0yM

x;Br

yMx;Cl

yMx;Co

yMx;Ec

yMx;Mx

yMx;US

yMx;w

yMx

qMx

US

65n i

nUS

00

00

00

00

00

0VUS;US

00

00

00

00

00

xUS

65n c

oUS

UUS;Br

0U

US;Cl

0U

US;Co

0U

US;Ec

0U

US;Mx

0U

US;US

0U

US;w

0yU

S;Br

yUS;Cl

yUS;Co

yUS;Ec

yUS;Mx

yUS;US

yUS;w

yUS

qUS

US

65n i

nUS

00

00

00

00

00

00

0Vw;w

00

00

00

00

xw

65n c

owU

w;Br

0U

w;Cl

0U

w;Co

0U

w;Ec

0U

w;M

x0

Uw;US

0U

w;w

0yw

;Br

yw;Cl

yw;Co

yw;Ec

yw;M

xyw

;US

yw;w

ywqw

VA

1n h

hBr′

0hCl′

0hCo′

0hEc′

0hMx ′

0hUS ′

0hw′

0h

DE

1n g

0gB

r ′0

gCl ′

0gC

o ′0

gEc ′

0gM

x ′0

gUS ′

0gw

′g

1984 P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

Mexico and the US in 2003, generally supporting the hypotheses above.For each country, the traded products are assigned to six differentsectors: Agriculture, forestry and fishing; mining (including oil and gas)and water; food; other light industry; heavy industry; and trade andservices. Fig. 1 shows that the primary industry plays a much moreimportant role in international trade for the Latin-American countriesthan for the US. Specifically, one of the most resource-intensive sectors,mining and quarrying, displays a trade surplus in all southerneconomies, while the US is a clear net importer of these products. Thefoodmanufacturing industry, which is verymuch related to agriculture,is also an important export sector for the South, especially for Brazil andChile, and to a lesser extent for Ecuador. As regards the light and heavyindustry, all South American countries show a trade deficit. However,Mexico is a special case concerning themanufacturing sector: both lightand heavy industry are well developed, with electronics, automotiveand cement industry playing a predominant role for export activities.Nevertheless,Mexico's tradeflows are quite balanced, asmanufacturingproducts are re-imported for final demand.

Fig. 1 falls short of giving a holistic view of international commodityexchange: First, it only represents the economic (monetary) side oftrade between the selected countries – the volume of exports andimports measured in current prices – but cannot reflect its environ-mental aspects in form of biophysical flows. Second, it does notdistinguish between the receiving countries of exports. Both shortcom-ings are dealt with in the remainder of this paper.

3. Methodology and Data Preparation

Measuring the total amount of material required as a result ofcommodities traded is not straightforward, and requires somemodelingtechniques. A Multi-Regional Input–Output (MRIO) model is used hereto measure the extent to which environmental changes in the South areconnected to consumption activities in the North, as well as theeconomic benefits stemming from the North–South commodity ex-change. MRIO models are a prominent quantitative tool to expressconsumption activities in terms of the different factors of production(includingmaterial and energy) required in the production process. TheMRIO technique has been widely applied to environmental studies,especially in the realm of CO2 responsibilities from a consumptionperspective (see, e.g., Munksgaard and Pedersen, 2001; Muñoz andSteininger, 2010; Peters, 2008).

In this study we used a model of seven regions, where Southernregions are represented by the following five Latin-American (LA)countries: Brazil (Br), Chile (Cl), Colombia (Co), Ecuador (Ec) andMexico(Mx). The North is represented by the United States (US), which is one ofthemain commercial partners of the above LA countries. Finally, a seventhregion representing the economy of the rest of the world (w) is includedin themodel. This is necessary for understanding the potential effects thatone region may cause in others by demanding commodities in a thirdregion. For example, if the US demands a car from China, then this couldraise the demand formetals in LA countries in order to produce the car inChina. This effect is captured by introducing this extra region that willreallocate the responsibilities to the final consumer, in this example, theUS.

The model is fixed to the year 2003, as it is the most recent andcommon year that data are available for a considerable number of LAcountries. The data and model description is classified into threegroups: (1) data concerning the construction of an MRIO table basedon multi-regional supply and use tables (MRSUT); (2) the extensionsof MRSUT to physical data (materials); and (3) model outline.

3.1. Multi-regional Supply and Use Table

Regarding the presentation of the approach we will closely followLenzen et al. (2004) who carried out an environmentally extendedmulti-regional input–output analysis for four European countries.

1985P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

Table 1 shows the layout of the MRIO table for the Americas, whereUrr = urr

ij

� �nrco ;n

rin

and Vrr = vrrij� �

nrin ;nrco

represent the domestic use

block and the transposed supply block respectively for region r, with rrunning for each of the regions in the model: Br, Cl, Co, Ec, Mx, US andw. Each element in the use matrix denotes the inputs of commodity iinto industry j, whereas each element of the supply block stands forthe output of commodity j in industry i; note that each industry onlyproduces one kind of commodity and no joint production takes place.As indicated in Table 1 as well, each country's supply and use tables(SUT) are entered into the model in their original commodity (ncor )and industry (ninr ) disaggregation level. For example, in the case ofBrazil (Br) i runs from 1 to 110 commodities whilst j runs from 1 to 55industries (see Table 1 for the commodity and industry dimensions ofa specific region). The off-diagonal of Table 1 contains the bilateraltrade data represented by each pair of possible combinations, i.e. Urs

with r≠s and r and s denote Br, Cl, Co, Ec, Mx, US or w.10 Thesebilateral trade matrices allow capturing interregional productiondependencies. Furthermore, xr and qr shown in Table 1 display thevector of total industry and commodity output of region r respective-ly. yrr and yrs represent the final demand within and across thecountries. The row vector hr denotes the different incomes, i.e.indirect taxes, wages and salaries, as well as profits and capitalallowances, the sum of which is equal to value-added. Finally, eachzero entry in the table denotes a zero matrix of appropriate size.

The construction of the MRIO for the Americas involves thecombination and harmonization of different data sources, such as:(a) SUTs valuated at the same concept (producer, purchasers' or basicprices); (b) derivation of the import matrix in some cases;(c) transformation into the same currency; (d) the construction ofbilateral trade matrices and finally; (e) the balancing of all informationconcerning imports and exports in one table by using RAS methods.Further details for each task are given in the following.

(a) Valuation: In some cases, use tables are published by thecorresponding agencies only in purchasers' prices, i.e. includingtransport and commercial margins, as well as taxes, rather than inbasic prices (i.e. without taxes and margins), as it is ideally desirablefor modeling.11 Use tables in purchasers' prices were available forBrazil, Colombia and Ecuador. For the rest of the countries underanalysis the use tables were displayed in basic prices. In order totransform the use tables from purchasers' into basic prices, taxes andmargins were removed by using the proportionality assumption,which states that each commodity used in either final or intermediatedemand is taxed and value-added to the transport and commercialmargins in the same proportion (see Bouwmeester and Oosterhaven,2008; Yamano and Ahmad, 2006, for similar procedures). Regardingsupply tables, all of them were originally in basic prices, so that noadditional data preparation was needed.

(b) Import matrix: Once all matrices were in basic prices, in thecases of Brazil, Colombia, Ecuador and the United States, it wasnecessary to divide the use block into a domestic and an import blockby using a further proportional import assumption, which implies thateach industry used the imported commodity in proportion to the totalused quantity of this commodity (for similar methods, see Yamanoand Ahmad, 2006; Bouwmeester and Oosterhaven, 2008).

(c) Currency: SUTs were converted from national currencies intoUS dollars by using the average annual exchange rates of thecorresponding year.

(d) Bilateral trade matrices: Each SUT maintains its own disaggre-gation level in order to use all the information provided by the SUTs.This entails working with rectangular bilateral trade matrices (BTM)at the off-diagonal of Table 1. With the purpose of constructing the

10 Hereafter, whenever superscripts r and s appear together, this means that they runfor each of the regions and r≠s.11 This is needed to reflect as precisely and unbiased as possible the quantity ofinputs required by each sector.

BTM, the first step was to build up the vectors of bilateral trade crsi• foreach pair of the countries.12 Commodities traded bilaterally wereobtained from the United Nations Commodity Trade StatisticsDatabase, which works with a six-digit Harmonized System (HS)commodity classification code, among other commodity classifica-tions. Subsequently, the bilateral trade vector from the Comtradedatabase was aggregated according to the classification system of theexporting country. Table 2 shows themonetary values of commodities(no services) bilaterally traded in 2003. By setting up a multi-regionalframework for the selected countries, a considerable part of theirbilateral trade relations can be traced. In this respect, Mexico exhibitsthe highest interrelation with the other economies under study: 61%of its imports and 84% of the exports are traded in the establishedNorth–South (N–S) region. The US is by far Mexico's most importanttrade partner, providing 58% of its imports and demanding 83% of itsexport commodities in 2003. The same trade pattern holds true forBrazil, but to a lesser extent. Colombia and Ecuador also show highinterregional trade linkages, with around 40% of all importsoriginating from and 50% of all exports going to one of the countriesof the N–S region. However, while the biggest share in exports (morethan 80%) is demanded by the US, the imports of Colombia andEcuador from the North and South are quite balanced. Notsurprisingly, the US displays the weakest trade linkages within theregion: While only 13% of its imports (15% of the exports) come from(go to) the South, with Mexico being the main partner, 87% (85%) aretraded with the rest of the world. As concerns services, due to the lackof data from trade statistics for the service sectors, we follow themethod proposed by Oosterhaven et al. (2008) for these estimates.Oosterhaven and colleagues suggest calculating bilateral tradeservices as a function of the commodities bilaterally traded betweenthe regions and the total amount of service i exported to the rest of theworld.

Having completed these steps, information from the importmatrices, Ms, which show the imported commodities for country sfrom all the world, is used to allocate bilateral imports across both theindustries and final demand of the importing country. In some cases,however, this is problematic because commodity disaggregationlevels between crsi• and Ms are different; while crsi• disaggregation isbased on r, exporting country, Ms information belongs to theimporting country. It was therefore necessary to assume thatcommodity i is used by the industries in the same import proportionas for the main commodity group. For example, US coffee importsfrom Colombia or Ecuador are allocated to industries and finaldemand in the same proportion as any other food product, since in theUS import matrix coffee does not constitute its own sector, as it doesin the Colombian or Ecuadorian table. Thus, Ms = m•s

i•

� �−1Ms, whereMs is the matrix of import shares of regions containing the inter-mediate input matrix concatenated with the final demand importmatrix and additionally disaggregated when major details wereneeded. The diagonalized vector m•s

i• is the row sum of the Ms matrixover all industries and final demand. Subsequently, the off-diagonalblock matrix is calculated as follows:

Urs = crsi• Ms

Since bilateral trade vectors are in a different classification thanimport matrices, the concordances have been allocated based uponthe sectoral description rather than upon strict correspondencesbetween commodity classifications. It is expected that at thisaggregation level, classification largely tends to match. Furthermore,crsi• is the diagonalized vector of bilateral trade between region r and sincluding services. Once the bilateral trade matrix, U

rs, is constructed,

12 Analogous to Miller and Blair (2009, p.88), a • indicates that all commodities,industries or regions are lumped together.

Table 2Bilateral trade data (in millions of US$ as of 2003). ROW = rest of the world, N&S=total region (North (US) and South (Brazil, Chile, Colombia, Ecuador and Mexico)).

Exports to/imports from Br Cl Co Ec Mx US ROW South N&S Total % of N&S in Total South–North South–South

Brazil – 2,025.00 769 398 3,267 18,963 55,565 6,459 25,422 80,987 31% 23% 8%Chile 821 – 300 315 1,082 4,323 18,540 2,518 6,841 25,381 27% 17% 10%Colombia 99 202.00 – 901 406 6,790 6,308 1,608 8,398 14,706 57% 46% 11%Ecuador 19 78 410 – 54 3,030 3,073 561 3,591 6,664 54% 45% 9%Mexico 533 480 744 254 – 139,700 26,350 2,011 141,711 168,061 84% 83% 1%US 9,732 2,531 4,113 1,227 105,723 – 717,075 123,326 123,326 840,401 15% – –

ROW 55,708 18,319 9,975 4,493 70,911 1,124,192 - 159,407 1,283,599 – – –

South 1,472 2,785 2,223 1,868 4,809 172,807 109,836N&S 11,204 5,316 6,335 3,095 110,532 172,807 826,911Total 66,912 23,635 16,310 7,588 181,443 1,296,999% N&Sin Total 17% 22% 39% 41% 61% 13%North–South 15% 11% 25% 16% 58% – –

South–South 2% 12% 14% 25% 3% – –

1986 P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

it is split into bilateral trade for intermediate uses, Urs, and finaldemand, yrs (see Table 1).

(e) Other issues refer to the fact that it is commonly found in tradestatistics that exports from region r to s are different compared toimports of s coming from r. For the construction of the BTM, importstatistics (rather than exports data) were used. This fact leads to there-scaling of the whole set of bilateral trade matrices against exportsby means of RAS, in order to regain consistency (see Oosterhavenet al., 2008, for further details on this topic).

The production technique of the rest of the world economy (w) isrepresented in this study by the technology system of the US, i.e. importsfrom the rest of the world are producedwith the same processes that areemployed in the US. Subsequently, the technical coefficients found (seeMiller and Blair, 2009) for this economy were re-scaled by world-GDPminus the GDP of the regions included in the model, in order to estimatebilateral trade coefficients between the rest of theworld economyand thecountries under analysis. These coefficients are almost zero in the case ofsmall countries such as Chile, Colombia or Ecuador, but turn relevantwhen large economies are concerned, such as the US.

3.2. Economic and Environmental Extensions of the Model

Regarding the indicator of environmental pressures in one region(e.g. South), this is calculated in terms of the RawMaterial Equivalents(RME) needed to satisfy consumption in the other regions (e.g.North). RME consists of measuring up-stream the physical flows thatare directly and indirectly embodied in the export and importcommodities. In the present study, direct and indirect upstreammaterials associated with international trade are estimated by meansof MRIO. Concerning the material flow data, the global material flowsdatabase by the Sustainable Europe Research Institute (SERI, 2008)was utilized. The only exception was Chile, where own estimationswere used. Notice that the material vector gr in Table 1 only entailsthe domestic extraction (DE) of each country; this means that unusedextraction has not been taken into account. Furthermore, the DE usedin this study does not include water or air, as it is usually incorporatedin MFA studies. The materials were subsequently clustered accordingto the commodity description of the SUT for each country.

As a proxy of the economic benefits resulting from internationaltrade, we used the value-added induced by exports. Considering value-added and exports separately, both variables are certainly very muchcorrelated. Nonetheless, in those cases where the production of aneconomy is highly integrated in the rest of the world, i.e. domesticproduction significantly relies upon imports, value-added induced byexports may give a better indicator of domestic benefits resulting fromtrade than the mere monetary value of total exports. Value-added data

(h in Table 1) disaggregated by industries is easily available, as it is partof the information provided in the countries' SUTs.

The vector form of the model extension depends on the way inwhich extended data are classified. In the case of value-added data h,the classification is by industry. That is, the extended vector containsthe corresponding VA values in the industries (nin in Table 1) andzeros for the commodities (nco in Table 1). While for the materialflows data g, it is the opposite: the vector contains zeros for theindustries and corresponding material values for the commodities.

3.3. The Model

The methodological foundations and developments of MRIO willjust be briefly described here, since they have been presented severaltimes in recent studies (see, e.g., Andrew et al., 2009; Lenzen et al.,2004; Miller and Blair, 2009; Muñoz and Steininger, 2010). In input–output analysis, the circular production of an economy is usuallycaptured through the following equation:

x = Ax + y ð1Þ

where x and y present the vector of total gross output and final demandrespectively, and A is the so-called technical coefficient matrix, i.e. eachelement aij in A denotes the amount of input i necessary to produce oneunit of commodity j. Solving for x, one obtains

x = I−Að Þ−1y ð2Þ

This basic relationship between gross output, intermediate andfinal demand also applies for amulti-regional framework inwhich x; yand A denote blockmatrices. x and y thereby represent the compoundvectors of industry and commodity outputs, and of aggregatedomestic and foreign final demand, respectively (see Table 1). Inorder to obtain the matrix of technical coefficients, the block matrix ofintermediate inputs Z is divided by the diagonalized gross outputvector:

A = Zx−1

Sincewe are interested in the impact of the consumption activities in aspecific region s (the receiving country) on the biophysicalflows of regionr (the source country), it is convenient to re-write Eq. (2) as follows:

x•s = I−Að Þ−1y•s ð3Þ

where in this case x•s denotes the change in the gross output across allregions in S=[Br, Cl,…, w] due to the final demand of region s∈S.

Fig. 2. Trade between USA and several LA countries in terms of Raw Material Trade Balance (RTB). Note: The primary vertical axis presents absolute values, whereas the secondaryvertical axis denotes per-capita values. RMEm and RMEx stand for Raw material equivalent of imports and exports respectively.

15 Data about population was taken from the Statistical Demographic Yearbook 2003

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It is straightforward to extend the model to the environment andvalue-added. We pre-multiply Eq. (3) by the diagonalized materialintensity vector gx, that is defined as

gx = gx−1

g•s = gx I−Að Þy•s ð4Þ

Column vector g•s represents the rawmaterial requirements acrossindustries and regions needed to satisfy the total final demand ofregion s. Once this outcome is obtained, it is filtered by each region.The extensions of the model to monetary variables are carried out in asimilar way, pre-multiplying Eq. (3) by the diagonalized value-addedintensity vector hx = h x

−1instead of material flows.

4. Results

4.1. Total Flow Analysis

Results drawn from the combination of the MRSUT and MFA forthe LA region show that the Raw Material Equivalent traded betweenthe selected Northern and Southern regions amounts to 728 Mt intotal. This quantity of traded material roughly corresponds, forinstance, to the aggregated Domestic Extraction (DE) of Spain andSweden in the year 2000.13 The US required 526 Mt from the South(which is a similar quantity to Spanish domestic extraction in 2000),meanwhile the South demands from the North the remaining 202 Mt(this amount is close to Swedish DE in 2000). The difference, 324 Mt,represents the total raw material trade deficit14 in the South as aconsequence of international trade. Fig. 2 presents further detailsabout the Raw Material Trade Balance (RTB) between each Southerncountry and the US. Brazil appears as the country with the largestdeficit in RME, and thereby as themajor provider of these LA countriesto the US' societal metabolism. Brazil's exports to the US were five

13 In 2000, the domestic extraction of Spain and Sweden was 529 Mt and 197 Mtaccording to data from the Material Flow Portal (www.materialflows.net).14 Analogous to Eurostat (2001), we refer to a deficit in RTB when the RME of exportsare superior to the RME of imports (contrarily, the traditional definition is that there isa deficit in monetary trade balances when exports are inferior to imports).

times larger than Brazil's imports from the US. The total deficitmagnitude in the RTB between the North and (the) South region iscomposed as follows: Brazil 46%, Mexico 20%, Colombia 18%, Chile 13%and Ecuador 3%. However, one should bear in mind that theeconomies under consideration greatly vary in scale — Brazil, forexample, was almost 14 times larger than Ecuador in terms ofpopulation in 2003.15 In order to account for the different size, wesuggest, in line with the indicators of raw material consumption(RMC) and RMC per capita, dividing the raw material trade deficit ofeach country by its total population. The secondary vertical axis inFig. 2 depicts the material trade balance per capita for the Southernregion. Moving from a total level to a per capita analysis, the majorinner-regional burden shifts from Brazil to Colombia, which shows atrade deficit of 12.9 tons per inhabitant. Chile follows with a RTBdeficit of 2.8 tons per capita. Brazil, Ecuador and Mexico show percapita deficits of about the same size (0.6–0.8 tons). On the contrary,the US displays a trade surplus of 0.7 tons per capita.

Let us now turn the discussion from physical aspects towardsmonetary aspects of this specific N–S trade. As mentioned before,monetary benefits of this N–S trade are here represented by the value-added created by the exports of a country.16 By using this indicator,we assess the bilateral trade relations between the North (US) andeach of the countries from the South. The total VA created due to thisN–S trade is 190 Bill. US$, of which 105 Bill. US$ is created in theSouth, owing to exports to the US, while the value-added created inthe US due to the imports of the South was equal to 84 Bill. US$, i.e.value-added created in the South was about 25% higher than thevalue-added created in the North. If the figures are additionallydisaggregated by Southern countries, it is found that all LA countrieshave a surplus in monetary terms resulting from trade with the US(see Fig. 3), which is distributed as follows: Brazil 63%; Ecuador 9%;Colombia 27%; Chile 25%; Mexico 15%. This follows mainly from thefact that the volume of exports to the US ismuch higher than Southern

of the UNSD.16 Two advantages of using value-added instead of direct exports are: 1) for verticallyintegrated countries, part of the intermediate products embodied in exports wereproduced in a third country, exports being therefore a less accurate indicator; and 2)consistency in conventional ways of estimating the material intensity; one can furtherdisaggregate by trade partner and domestic material consumption in the general case.

Fig. 3. Value-added created as a result of the trade between USA and several LA countries (billions of US$). Note: The primary vertical axis presents absolute values, whereas thesecondary vertical axis denotes per-capita values. VAm and VAx stand for the added value created in each country by imports and exports respectively.

1988 P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

imports from the US (see Table 2). Analogous to the analysis ofphysical flows above, we take into account the size of the economy bypresenting the results at a per capita level. In this regard, Fig. 3 showsthat Colombia, which has shown the highest RTB deficit per capita,gains almost 350 US$ per capita out of its trade with the US. Ecuadoralso exhibits a high level of net value-added created by trade (72 US$per inhabitant), while having a relatively low RTB deficit compared tothe rest of the LA countries. With about 39 US$, Brazil's trade with theUS entails the lowest value-added per capita.

In conclusion, the economic trade analysis for this particular yearand group of countries suggests the South as a ‘winner’17 of thecommodity and service exchange, since monetary profits in the Southare about 25% higher than in the North. If the focus is, however, turnedto the physical counterpart of this exchange, then the analysis showsthe South as the relatively bigger loser— physical requirements in theSouth are 160% larger than in the North. It therefore depends on thecriterion used to evaluate international trade as to which region weidentify as the winner or loser out of the exchange.

4.2. Material Intensity Analysis

In order to shed further light on the results, a relative analysis isconducted in the following. For doing so, the economic (value-added)and environmental (material flows) outcomes of the model aremerged into a third indicator called material intensity (the ratiobetween materials and VA) of international trade. This allows us tostudy the material needed to satisfy specific international regionaldemands per unit of VA created in the exporting country. Inconventional MFA studies (e.g. Eurostat, 2001) material intensity ismeasured in a similar way, i.e. domestic extraction per unit of valueadded.18 Nonetheless, we find the idea of associating a materialintensity to a particular trade partner for discussing N–S trade issuesinteresting. This is because material intensity may change between

17 In this regard, the term ‘winner’ has to be carefully understood; since the chosenindicator – total value-added induced by exports – neither reflects the amount of laborembodied in exports nor the specific working conditions, and is therefore not able tocover any equity aspects of trade.18 Instead of domestic extraction, one could also use direct material inputs or directmaterial consumption.

trade partners due to differences in the commodity mix traded fromone specific region to another.

The material intensities linked to each international trade partnerare presented in Table 3 together with the material intensities ofdomestic production. The results show that Southern exports to theUS are, in general, more material intensive than exports from the USto the South. On average, 2.4 kg of materials were needed per US$ ofVA created in the North, whereas Southern exports involved 5 kilosper US$ of VA. Therefore, S–N material intensity was twice as large asN–S material intensity. If we disaggregate the S–N intensity bySouthern countries, then Chile and Colombia display the biggestasymmetries, with intensities that are about 7 and 5 times higher thanfor the US (see Table 3). Comparing the material intensity of exportsto the North (Column 3 in Table 3) with the national intensity, i.e.domestic extraction of rawmaterials divided by total GDP (Column 5),it is evident that the S–N trade uses many more resources per unit ofadded value than domestic production. Specifically in the case ofBrazil, Colombia and Mexico, the material intensities of the exports tothe US are almost double as high as the national intensities, a findingwhich further emphasizes the unequal exchange of physical flowsinvolved in N–S trade.

5. Discussion and Final Remarks

Total N–S and S–N trade in terms of RME and value-addedamounted to 728 Mt and 189 Billion US$ respectively. If the attentionis put on the absolute quantity of material flows involved in trade,which is the relevant dimension from an ecological viewpoint(because of the ecosystems' carrying capacity), then results generallysupport the hypothesis that the South was feeding the North's societalmetabolism: S–N material exports were 1.6 times larger than N–Smaterial exports, resulting in a net deficit for the South of 324 Mt. Theinterpretation of these results in the context of the North–Southhypothesis should be taken carefully, though.; while empiricalevidence certainly supports the hypothesis that environmentalpressures remain in the South, part of the North–South hypothesisfails for the sample of countries since the larger part of the economicsurplus has remained in the South, contrarily to what would havebeen expected. The South benefits in absolute economic terms fromthe commodity exchange. The surplus in the South was 26% larger

Table 3Material intensities of the trade between USA and several LA countries. RME = raw material equivalent, DE = domestic extraction of raw material, VA = value-added. Note: ‘TotalSouth’ refers to the regional average.

North (US)

RME imported fromUS÷ VA created in US(kg/US$)

RME exported to US by countryr ÷VA created in region r of theSouth(kg/US$)

Relative material intensity ofexports to USA and importsfrom USA

National intensity=DE of countryr÷total VA created in country r of theSouth (kg/US$)

Relative material intensityof exports to USA and totalproduction

Country r inthe South

(1) (2) (2)÷(1) (3) (2)÷(3)

Brasil 2.9 10.3 3.6 5.7 1.8Chile 1.8 12.4 6.9 9.3 1.3Colombia 2.4 11.8 4.9 6.5 1.8Ecuador 2.1 5.3 2.5 3.5 1.5Mexico 2.4 2.9 1.2 1.6 1.7Total South 2.4 5.0 2.1 3.9 1.3

1989P. Muñoz et al. / Ecological Economics 70 (2011) 1981–1990

than in the North, this was mainly due to the fact that the totalmonetary value of imports from the North was 31% larger thanSouthern exports. When the material intensities are taken intoaccount, it is found that asymmetric N–S trade does hold in relativeterms; the intensity in the South being twice as high as that in theNorth. A first interpretation of these figures would conclude that thecommodity mix demanded by the North is more material intensivethan the Southern one. Another potential explanation could be foundin the technological gap between the two regions in the sense that thetechnology in the South may be less environmentally friendly than inthe North. However, higher resource efficiency does not necessarilyimply a superior technology. It rather indicates that the economy isspecialized in a later stage of production (e.g. of final goods andservices), sincere resource efficiency (i.e. the material use per US$ ofadded value) increases the further downstream production takesplace (Ayres and Kneese, 1969; Fischer-Kowalski and Amann, 2001).This is certainly the case for the regions in our study: From the tradestructures presented in Fig. 1 it is evident that the primary sector playsa predominant role in the exports of the South, while the US mainlyexports manufactured products. Thus, the difference in materialintensity of the commodities traded is much more linked to thedemand pattern of the North than to inefficient production tech-niques in the South. A spatial decomposition of the indicators into thetechnology- and the mix-factor of commodities traded would furthershed light on this discussion.

The present analysis therefore shows that this specific N–S andS–N trade in the Americas presents significant environmentalasymmetries, as a side effect of the prevalent international tradesystem. Other studies (e.g., Giljum et al., 2008; Muñoz et al., 2009)have proved the United States' physical trade deficit with the rest ofthe world in terms of total RME, as well as similar trends for otherworld regions, such as the European Union or Japan. Empiricalmeasures concerning the physical dimension of North–South tradestill remains unknown for the global case. If one assumes, however,that North–South patterns behave in a similar way as shown here,then this may lead one to think not only about the explicit connectionbetween the environmental changes in the South due to Northernlifestyles, but also about the physical feasibility of replicating thedevelopment path taken by the North for the South, in the light ofongoing global environmental change and natural resource depletion.

Finally, it is worth remarking that in this study, we assessedcommodity exchange in the light of RME and value-added. Naturally,there may be additional components determining this outcome, asother inputs, such as labor and capital, also affect the results. It isequally relevant to bear in mind factors outside of the marketablecommodity spectrum that play a role in production and exchangesuch as: ecosystem services, pollution, climate change problems,unpaid work, etc. Extending the analysis to other factors would be

highly desirable; since, as this paper has shown on the basis ofmaterial flows and value-added, it is critical to re-think the set ofindicators for assessing the overall benefits/costs of trade. This is allthe more important in the face of a world-system whose parts havenever been as interdependent as they are today.

Acknowledgments

We greatly acknowledge comments and suggestions of twoanonymous reviewers from this journal. We would also like tothank Maximilian Gödl for valuable discussions and feedback on anearlier version of this manuscript. Jordi Roca acknowledges financialsupport from the Spanish Ministry of Science and Innovation in thescope of the research project ‘ECO-2009-11099/ECON’.

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