Free Trade And Environmental Pollution: Theoretical Analysis And China's Empirical Study

With the development of economic globalization and trade liberalization, the environmental pollution has become an important world problem. International organizations and experts have conducted a large amount of researches on the free trade and environmental pollution problem and made some valuable research achievements, but some aspects of the problem have not draw clear conclusions and need further research and practice to verify. At the same time, environment related trade disputes are increasing in the international community. These disputes not only affect the normal development of the international trade, but also go against the global environmental protection. Therefore, the coordination between the free trade and environmental protection has become an urgent task that the international community must be confronted.The foreign trade has played a pivotal role on the rapid growth of economy during thirty years of China's reform and opening up. Meanwhile, China's trade-related environmental pollution has become more and more severe. China's foreign trade neglects the sustainable development and executes an extensive model of development for a long time. China's export products are mostly resource-intensive and pollution-intensive products. These products not only use a lot of resources, but also cause the increasingly serious environmental pollution. Natural resources excessive consumption and environment pollution become the price of high-speed development of the economy and trade. Therefore, how to promote the trade liberalization and environmental protection has extremely profound significance for China's transformation of the economic development mode and building a harmonious societyBased on the existing research results, the dissertation makes a relatively systematic and in-depth discussion on the problem of free trade and China's environmental pollution. In the theoretical analysis, we first establish a theoretical analysis framework by constructing a general equilibrium model of trade and environment pollution. Based on this model, we discuss the effects of free trade on one country's environmental pollution. Then we analyze the environmental impacts during the trade liberalization caused by the environmental policy and factor endowments differences. In the empirical analysis, we use the latest data describe the relationship between China's foreign trade and environment pollution statistically and then make an econometric analysis. Finally we make conclusions and propose some recommendations for the coordination development between our country's foreign trade and environment protection.The dissertation's structure arrangement is as follows:The first chapter is an introduction. Firstly, we discuss the background and significance of the research. Secondly, we put forward the research ideas contents. Finally, we introduce the main innovation and deficiency in this dissertation.In the second chapter, we review the research progress in domestic and abroad about the trade and environment issues and then make a comment. At present, the researches of trade and environment are still in a scattered exploring state, and lack of a complete research system. Therefore, we should gather up the threads related the trade and environment issues, and discuss the relationship between the various elements, and then form a complete analytical framework. Eventually we can promote harmonious development of trade and environment.In the third chapter, we study the environmental pollution in a small open economy. We construct a two department general equilibrium model of trade and environment pollution. This model links the factor endowments with the international trade pattern. First we put pollution as a by-product of production process. Then we use the pollution demand and supply model to discuss the optimal pollution policy. We gradually interpret theory structure of the model detailed. The definition and formula of this chapter are used in the subsequent analysis. So this chapter is a theory basis of the further analysis.In the fourth chapter, we analyze the effects of free trade on a country's environmental quality. That the trade liberalization is harmful to the environment is uncertain. On the one hand it depends on the policy system. The free trade itself will not lead to environmental problems, but the improper environmental policies will lead to environmental problems. If environmental policy system is appropriate, further liberalization of trade is not necessarily cause adverse effect on the environment. On the other hand, if there does exist a reciprocal relationship between the actual income level and environmental quality, so even if the trade liberalization cause pollution emission levels rise and environmental degradation, it fully may be beneficial to the welfare level. However the trade liberalization that causes pollution emission levels dropped may cause the welfare level deteriorated completely. In other words, that the trade liberalization makes pollution emission levels decline is not necessarily beneficial, and that the trade liberalization makes pollution emission levels raise is not necessarily harmful.In the fifth chapter, we discuss the effects of the environmental policy and factor endowments differences on pollution emission. The results show that if environmental pollution regulatory policy has not fully reflected emission's externality, or pollution emission supervision policy has not been compulsory execution, the international trade is harmful to both individual and the environment in this kind of condition. Poor countries are tending to implement laxer environmental regulatory policies than rich countries. International trade promotes polluting industries to transfer to poor countries, and that may cause damage to poor countries ultimately. If every country has differences both in pollution regulatory policy and factor endowments, the comparative advantage is decided by both the pollution regulatory policy and the factor endowments differences. If factor endowments can affect international trade, the conclusions of pollution haven hypothesis model may be overridden. If the cost disadvantage can be compensated for by other factors, the high-income countries may have comparative advantage in polluting industries also at the condition of having stringent pollution emission regulatory policies than other countries. Of course, if the differences of factor endowments can not enough to offset the cost differences caused by environmental regulatory, the conclusions we get is consistent with those in pollution haven mode. For some industries, and the effects of the endowments may enhance the effects caused by pollution emissions policies. If the polluting industries intensively use abundant unskilled labor or natural resources in low-income countries, the polluting industries will be transferred to these countries with these advantages of factor endowments and relatively loose environmental supervision. Therefore, considering the different characteristics of every industry, both the interaction of environmental policies and factor endowments in every country and the role those determining the international trade patterns are different also.In the sixth chapter, we analyze the current situation of China's foreign trade and environmental pollution using descriptive statistics analysis method. We mainly describe the relationship between the trade scale, the trade structure, foreign direct investment and environmental pollution. We also discuss the characteristics of China's trade market structure. China's majority export industries are pollution intensive. The industries those are most harmful to the environment include textiles industry, leather and fur industry, mechanical manufacturing industry, electrical and electronic equipment manufacturing industry, fabricated metal products industry. China's export markets are too centralized, especially concentrated in the countries and regions such as EU, US and Japan. Those countries' environmental standards are more stringent and perfect, so our exports confront serious green trade barriers. At present, China's pollution intensive industries those existing the trade surplus and the transfer of environmental cost are high participation industries of FDI.Chapter VII is econometric analysis of the relation between the trade and environment pollution using China's related data. Based on the time series analysis, the results show that, the increase of foreign trade dependence and foreign investment dependence brings negative environmental impacts since 1985. Based on the analysis of panel data model during 2000～2008, the results show that the scale effect increases the environmental pollution and technical effect reduces the environmental pollution of the eastern region. Structure effect increases environmental pollution of eastern and central regions, but reduces environmental pollution of western region. On the whole, the openness of trade has a positive effect on the eastern region, but it has a negative effect on central and western regions. "Pollution heaven" phenomenon does exist in central and western regions. From industry level, China's foreign trade industries those bring greater negative impacts on environment than others respectively is textile industry, leather and fur industry, food, beverage and tobacco manufacturing industry, mechanical, electrical and electronic equipment manufacturing industry, black metal smelting industry, rolling processing industry. The study on the impacts of environmental policy differences on Sino-US trade shows that there exists relatively stable correlation between Sino-US environment regulation index and import-export index. The relative severization of the United States's environmental regulation led our pollution intensive products play a significant role in Sino-US trade surplus. China undertakes more environmental cost in the Sino-US trade.Chapter VIII is the conclusion of this dissertation and policy recommendations. This chapter makes a summary of full text. According to the environmental pollution problems existed in China's foreign trade progress, the author puts forward the policy framework for the coordinated development of China's foreign trade and environmental protection.