Environment Effect Of Bilateral Free Trade Agreement

Nowadays more countries seek economical development through boosting trade volume by signing bilateral or multilateral free trade agreements. Trade liberalization helps economical activities overcome regional limitation but it also makes environmental problems a severer concern.This paper focuses on CAFTA, analyzing environmental effects of China-ASEAN bilateral trade. First, this paper compares the environmental contents of international and Chinese free trade agreements follpwed by an analysis of pollution-intensive commodities trade pattern of China-ASEAN trade and current industrial pollution status in China. Then, by combining factor endowment theory, pollution haven theory and scale-structure-technic analyzing system, the paper builds a theoretical model to analyze environmental effects of China-ASEAN bilateral trade. This paper uses industrial level data of China and ASEAN from 2000-2010 to conduct empirical study. Finally, this paper comes to the conclusion that:from 2000 and 2010, economical development in China generates greater negative scale impact than positive technic effect, industrial pollution emission increases, marginal diminishingly, as output increases. Factor endowment cause reduces industrial pollution in China indicating that China has comparative advantage in producing labor intensive products. Pollution haven cause suggests China has relatively lower GDP per capita and thus slacker environmental regulation comparing to ASEAN, which means China has comparative advantage in producing pollution-intensive products; China-ASEAN bilateral trade has different environmental effects on pollution-intensive industries and non-pollution-intensive industries. Factor endowment cause of China-ASEAN bilateral trade generates greater influence than pollution haven cause, pollution-intensive industries in China has comparative advantage in exporting pollution-intensive products to ASEAN, Bilateral trade increases pollution emission of pollution-intensive industries in China but its influence on non-pollution-intensive industries is not certain.