Environmental Cost Internalization, Environmental Regulation And Coordination Between Trade And Environment

The concern about the issue of trade and environment began in 1980s. On the environmental effects of free trade, there have always existed two kinds of conflicting views: free trade theory and environmentalist. Scholars have been keeping on carrying out discussion about such questions as trade development and the EKC shape, the north-south trade effect on environment, and the relationship between the environmental regulation and international competitiveness. While the trade volume has been ever growing, China has become the processing plant for many global commodities. But the major exporting sectors are environment-sensitive industries and the trade growth is built on resource depletion and environmental damage. At present, its foreign trade development encounters resource-environmental constraint bottleneck and increasingly serious environmental technical barriers.Based on above theoretical and practical background, this dissertation makes a theoretical analysis on the conflict between trade and environment and the non-sustainability of trade activity. The effects on environment of trade liberalization are embodied through scale effect, composition effect, technology and product effect, as well as regulation effect. Trade in service has more complicated and covert influences on environment, which are direct or indirect. From the aspects of economic man hypothesis, the limitation of ecological environment system supply and the drawback of cost-profit measurement method in trade, the dissertation points out that the root of the problem is the clash between the trade activities and ecological laws. Integrating the ecosystem and economic rules into an entirety and applying thermodynamics theorem, the dissertation indicates that economic activities including international trade has kept the entropy increasing and that the ecosystem will lose the balance if the environmental threshold is broken. Therefore, the development and operating mode of trade must comply with the overall ecosystem constraints, coordinating the holistic nature of ecological environment.Secondly, beginning with the environmental externality, the dissertation elaborates that environmental costs (EC) consist of environmental factor price, environmental damage cost and contingent cost. Based on the EC measurement methods, study is made under the following situations: with and without environmental externality, internalization of environmental cost. It is essential to reflect the environmental damage and its compensation in traded goods and service pricing; otherwise the scale effect of trade will accelerate the environmental deterioration.Facing the problem triggered by the conflict of classical comparative advantage theory and environmental protection, the dissertation revises the comparative advantage model by bringing into the environmental factor and cost. Meanwhile, H-O-V model is analyzed under the environmental factor situation. One nation's comparative advantages will possiblily change when considering environmental factor endowments. The difference of environmental cost coefficient and environmental regulation among countries will alter the previous specialization and trade patterns. The present price advantages of developing countries, which based on lax environmental standards and lower abatement cost, are not sustainable and will lose in the ultimate.Environmental regulation is the effective way to internalize the environmental cost. According to Porter Hypothesis, the dissertation argues that previous viewpoint, which claimed that environmental regulation clashing with international competitiveness is the static standpoint. By analyzing the welfare of innovation triggered by environmental regulation, it can be seen that proper strategic environmental regulation can stimulate environmental technology and industry innovation and bring first-mover advantages to enhance competitive edge. Some conclusions are made by comparing the welfare effects of environmental and trade measures: under the condition of optimal environmental measures, trade liberalization is better off than autarky; some trade measures such as tariff and subsidy can improve environment to some extent but is less effective than environmental measures in increasing welfare level. Therefore, trade measures are second best while the environmental regulation is optimal since the non-cooperative tariff or sanction probably brings trade distortion.Then the dissertation discusses the conflict between China's foreign trade growth and environment. On one hand, the rapid development of China's foreign trade has negative influence on environment. This conclusion is made based on the export volume of major industrial sectors and on the change of"three waste emissions"(waste gas, waste water and solid waste emissions) of major industries as well as the interlinking between the trends in export volume and waste emissions in coastal open areas. Evidences prove that the increasingly expanding foreign trade has accelerated the negative effects on China's environmental quality. On the other hand, China's exports are confronting increasing environmental barriers, which have influenced the export scale and profit.To solve the above problems, it is necessary to integrate trade development with environmental protection and abandon the idea of"development first, treatment later". The irreversible environmental deterioration will appear if the ecological threshold is broken. Therefore, strategy for coordinating trade and environment should include: establish evaluation index system for trade and environment; implement circular economy in order to tend towards environment repairing from environment export; integrate the strategic environmental regulation with flexible tariff measures to internalize the environmental cost. Furthermore, the dissertation also elucidates that developing trade in environmental service and constructing interactive mechanism among environmental technology innovation, trade and environment are the effective methods to achieve the harmony of trade, environment and sustainable development.