The Economic Effect Of Strategic Environmental Policy In China

In recent years, the relationship between environmental protection and economic growth has attracted public attention. At the same time, the strategic environmental policy has been mature and imported by Chinese experts, which laid foundation for this thesis. In general, the strategic environmental policy, derived from the strategic trade policy, is attracting people's attention in recent years. In international trade and international investment, experts worry that both the developed and developing countries may have the tendencies to boost their exports and attract foreign direct investment by excluding environmental cost from total cost and lowering their environmental standards. However, these kinds of behaviors would spur other countries'retaliation and lead to environmental degradation to their own. Therefore, from economic point of view, whether the policy succeeds or not depends on the tradeoff between them, that is whether the gains from the policy can overcome the losses. This standard will be used to judge the strategic environmental policy in China. Though officially, no such policy has ever been announced by the government, the international economic policy currently implemented falls into the basic categories of strategic environmental policy. This thesis tests the policy's economic effect in both international trade and foreign direct investment areas, proves that in international trade arena, the strategic environmental policy is successful and in international investment, it fails to some extent. And then, some policy recommendations are proposed such as improvement of public awareness for the environment, the actualization of ISO 14000 and the use of relative regulation of WTO, of which the importance of public awareness is especially attached. By game theory, the paper reports the behaviors of firms would change automatically if the public has enough concerns about environment. To update three factors are concentrated in this thesis. The first is the theoretical and empirical analysis of externality and trade, which includes externality and comparative advantage, the equilibrium of externality and trade, and data analysis with the correction of environmental policy. The second is influence of economic growth on trade, which includes environmental Kuznets curve, income, trade, energy, environment and related models. The third on is influence of environmental regulation and policy, which includes migration of dirty industry, international organization and policy coordination among countries. To sum up the relationship between trade and environment is interdisciplinary. It involves (1) externality, trade and countries'policy, such as green subsidy and green barrier, which belongs to international trade (2) the effect of environmental regulation and policy on trade and the transfer of dirty industry, which belongs to international investment. Most literatures, limited by space, only review one part of them. Besides, the strategic environmental policy just attracts attention, and most of work is contributed to the basic theory, few of them make use of it to analyze the policy in a single country. This thesis hopes to fill with the vacancy. It analyzes the above mentioned two parts in a single work, and uses it to examine China's strategic environmental policy.