Study On The Environmental Effects Of Free Trade

Based on the existing studies, this dissertation investigates the environmental effects of free trade, especially focuses on the impact of China's foreign trade on local pollution emissions in the process of the trade liberalization by means of normative and empirical analysis.Theoretically, the dissertation firstly demonstrates how the environmental comparative advantage occurs and how it affects the trade pattern and trade benefits, especially, the environmental benefits with the environmental factors taken into H-O model, by using the principles of international trade, environmental economics and welfare economics. Next the mechanism of the free trade's environmental effects is studied, from the points of the Pollution Haven Effect & Factor Endowment Effect, "the three environmental effects", and the international transfer of pollution induced by the emissions embodied in trade. Finally, according to the principle of input-output analysis, the econometric model of trade liberalization's environmental effects is built.In terms of empirical analysis, first, this dissertation provides a statistical description about the characteristics of foreign trade in China, its impact on environment, and the industrial pollution emissions of the major industrial branches. The results indicate that the extensive growth mode of China foreign trade has severely worsened the local environment and challenged the sustainable development of itself. Also it finds that the export increases the pollution while the import relieves the burdens on the resource and environment.Second, using the model mentioned above, the dissertation calculates separately the amount of emissions of the waste water, waste gas and solid waste embodied in industrial export & import trade in China, including these of the major industrial branches, and the pollution term of trade (PTT) as well. The dissertation also estimates the scale effect, structure effect, technical effect, their cross reactions and the net environmental effect of the industrial export. We find that the net environmental effect is negative, i.e, the export harms the local environment. The fundamental cause is the huge scale of the export; the structure effect is also negative but relatively small whereas technical effect is positive. When taking the import into consideration, we find that it has great "substituted effect" on local pollution emissions, and also the ratio of PTT is smaller than 1, which means the industrial foreign trade is good to the local ecological environment, and at present, there doesn't exist such a situation that china has a trade surplus but an environment deficit. In other words, Factor Endowment Effect plays a decisive role on the environmental effect of free trade while Pollution Heaven Effect is not the case. The comparative advantage and the trade pattern of China's foreign trade are still decided by the H-O Principle, and our relatively lax environmental regulations cannot change the comparative advantage. But the rising trend of the PTT ratio warns that we can't be so optimistic about China's environmental effects of trade liberalization.Lastly but not least, the dissertation points out sustainable trade is the way to fulfill the win-win target between free trade and environment in China. Some suggestions, especially trade policies and environmental regulations, are recommended so as to get the Chinese sustainable trade policy system.