Is Trade Good Or Bad For The Environment?

Since China's accession to the World Trade Organization (WTO) in 2001, its trade volume has quadrupled, reaching a record high of $1.15 Trillion USD as of 2004 with expectations of further increases this year. Now in its post-transitional period of accession, the excitement of the past three years has begun to cool down and the government is beginning to place more attention on the negative impacts that have accompanied its trade liberalization successes of the previous years. Chief among these is environmental degradation. Traditionally, trade and the environment have never been 'the best of friends'and China's case is no different. Figures show that record trade surpluses and economic growth have been accompanied by an equally record level of environmental degradation. Despite this almost universal acceptance that trade is harmful to the environment, I adopt the position that this may not necessarily hold true in all situations. By using the venerable insights of economists like Copeland and Taylor, Chichilnisky and Coxhead, I examine the important yet often ignored role that property rights can play in reducing over-exploitation of renewable resources, a situation referred to as the 'tragedy of the commons.'In an attempt to make a real-world application of these theories, the local China situation is examined within the context of Copeland and Taylor's model. And in a more international context, Chichilnisky's North-South model is interestingly applied to China (representing the North) and Southeast Asia (representing the South). This China-Southeast Asian correlation with the North-South model is significant in providing a real world example in which international trade need not be held responsible for resource depletion, as long as market distortions such as property rights mechanisms are implemented. In order to further substantiate this claim several case studies done in China are presented. These provide significant insights into what is actually happening at the domestic level and serves as a bridge between theory and reality. Muldavin's Henan Province Villages case study and South Weekend's report on the Maowusu Desert all show that overexploitation of renewable resources can in fact be ended as long as property rights are well defined. The current situation of ill-defined property rights in China is therefore identified as a key factor to be considered if China is to continue along its sustainable development goal. If this is done, China will not only be able to maximize its gains from trade, but it will be on its way to achieving a sustainable and circular economy. Additionally, it will serve as an example for the world, especially developing countries that a mutually beneficial relationship between trade and the environment can in fact exist.