An Analysis Of The Impacts Of International Trade On Environmental Quality In China

Globalization and trade liberalization has become an obvious trend since more and more countries and regions involved in the global specialization in 1980s. According to WTO statistics, the world merchandise trade amounted to $10.5 trillion and commercial services trade reached at $2.3 trillion in 2005 after a five-year constant growth at 10 percent. The rapid development of China's trade since joining the WTO in 2001 has enhanced its role in international trade. China became the third largest merchandise trader in 2004 and is likely to become the number two trader in 2007.International trade has affected people's income level and living standards worldwide while incorporating various aspects of environmental issues. The emissions of carbon dioxide and sulfur dioxide have been increasing recently, resulted in acid rains and green house effects. The pollution of rivers and lakes caused by rapacious exploration of natural resource restricts the sustainable development of economics. China has witnessed a quick reduce of environmental quality along with a continuous growth of foreign trade after its openness to the world. Ecological environment pollution has become a critical factor that retards the economic growth of China.International trade contributes to effective application of resources in conventional theory of international trade. If the price of natural resource includes all related cost, free trade can maximize the overall welfare of society by minimization of environmental cost. However, natural resources are always wrongly relocated due to the existence of market failure and government failure. International trade has negative effects on the environmental quality. The way that international trade affects the environment can be concluded as scale effects, composition effects, technique effects, income effects, products effects and policy effects. International trade have both negative and positive effects on the environmental quality, the net effects of international trade are determined by the comprehensive comparison of the five effects.This paper examines how international trade affects the environmental quality in China. The objective is to provide a quantitative assessment of the effects of international trade on environment and test the Environmental Kunets Curve in China. We develop a theoretical model (CGE model) of China to divide trade's impact on pollution into scale, technique, composition and policy effects and then examine this theory using data on the emission of sulfur dioxide, polluted water and generation of solid waste from Yearbook of China 2006. In order to investigate the long-term equilibrium relationship between international trade and environmental quality, we make a regression analysis of environmental quality with international trade by using related China's time series data from yearl985 to 2005. In the last part, we provide some policy suggestions on the sustainable development of China's international trade to restore the good quality of the environment.