Research On The Impacts Of The Internalization Of Environmental Costs On The Comparative Advantage Of China’s Export

Along with the rapid enlargement of the global trade, the environmental protection problems in international trade caused worldwide attention. China is a steel-producing and also a steel exporting country, has a comparative advantage in the export trade. But the steel production and trade consumed a lot of energy and polluted the environment. These considerations for the energy consumption and environmental pollution costs are not included in the cost of production.Therefore, it caused a comparative advantage in measurement error, and it also brined a loss of social welfare.This article started from analyzing the status quo of China’s iron and steel trade and comparative advantage, analyzed China’s steel production and trade situation, and used the revealed comparative advantage index to measuring the comparative advantage of the trade situation of China and South Korea, China and the United States Steel. Draw the conclusions that China is a steel-producing and also a steel exporting country, have a comparative advantage in the export trade. This article as an entry point to the internalization of environmental costs in international trade theory, analyzed the "external diseconomies" of environmental resources, and studied the connotation of the environmental cost internalization and accounting methods, to lay the foundation for the research on the impact of the internalization of environmental costs on the comparative advantage in the following.This paper argues that the traditional theory of comparative advantage ignored the environmental costs in international trade. It was not incorporated the environmental costs into the cost of production, so it can not accurately determine the countries comparative advantage, therefore result in the loss of the social and economic welfare. This article will amend the theory of comparative advantage in the future environmental costs, in order to draw more accurate comparative advantage situation. At the same time, the paper will analyze the welfare state that based on the internalization of environmental cost. The conclusion is that the internalization of environmental costs will help improve the level of social welfare.In the empirical aspect, this article will use the pollution control costs instead of the environmental costs variables, and take advantage of China’s revealed comparative advantage index in the iron and steel trade of China and South Korea, China and the United States approximation instead of comparative advantage variables. The article will establish two unary linear regression models, in order to research the impact of the internalization of the environmental cost on the comparative advantage. The conclusions are following:The impacts of the internalization of environmental costs on the comparative advantage are uncertain. Because the differences among the trade products, trade patterns and trade partners will affect the price elasticity of demand for export products. For the commodities that have different price elasticity of demand, the impact of the price on the export values is very different. On the other hand, the environmental cost internalization will also promote enterprise technological innovation, accelerate the pace of innovation and improve the international competitiveness of enterprises.Finally, on the basis of the theoretical and empirical analysis. This article made recommendations both from the government and enterprises. Government should establish an environmental cost accounting system, and enterprises should enhance environmental awareness, and actively develop green products.