The Impact Of International Trade On Chinese Environment

After the economy reform and opening up started in1978, China has experienced remarkable rapid growth for nearly thirty years. Opening up trade policy is acknowledged as one of the most important factors to promote industrialization of China and China’s coastal provinces. However, Behind the strong economic growth and rapid expansion in the size of foreign trade, the shortage of energy sources and environmental degradation has appeared. Meanwhile the sustainable development suffers challenge. How to achieve economy growth under opening policy without causing serious environment degradation and loss of future potential growth, become one of the main topics of the study of Chinese economic development issues.There are a lot of studies on the impact of trade liberalization on environmental quality, but so for, did not unite the conclusion. China is undoubtedly an excellent example to study this topic. Because, firstly, as the biggest developing country in the world, China adopted the open-oriented economic growth model. With deepening of international division of labor, the adjustment of industrial structure and the growing process of urbanization, a serious of political, economic and social changes have taken place, which make us research the various direct and indict relationships among economy growth, foreign trade and environment in a more systematic and more complex framework. Secondly, Serious imbalance in regional economic development and every province’s independent environmental policy right under the current environmental management system, which make us can use panel data of china’s31provinces, autonomous regions and municipalities to do analysis. So the conclusion will become more reliable and stable. Based on previous studies, this dissertation use environmental Kuznets curve theory, pollution haven theory, trade-environment scale/composition/technical effect and combining with China’s special characteristics and the actual situation research the impact of trade liberalization on China’s environment from both theoretical and empirical perspective. Try to answer the question:under the open-oriented economic growth mode, what and how trade liberalization affect China’s environment? Compared with previous studies, improved the theoretical model, a more detailed industry data, analysis of the relationship between trade and environment from various angles, distinguishing different influence path, etc., are optimized and innovation in this paper.Based on the existing literature summarized, organized and reviewed, this article simply introduces the development of China’s economy, foreign trade and environment condition, then utilizes reduced environmental Kuznets curve equation to test whether "Inverted-U" relationship between economic growth and environmental quality exists in China and calculates the per capital GDP under EKC curve of inflection point. After that, I construct a two country open economy growth model with an international capital flow and foreign trade to analyze the income-environment relation over the inter-temporal growth path of the economy. Then this essay investigates whether "Pollution Haven Effect" affect the pattern of China’s foreign trade using China-OECD bilateral trade data. Additionally, we explore the relationship between pollution, income and high dirty industry’s import and export by estimating EKC again and compare the predicted turning point in the previous model. Next we decompose the international trade environmental effect into scale, structure and technical aspects, and compare the respective roles. Then we focus our research on international trade technical effects on the environment using the patents data in environment-related technologies to build the international frontier technology knowledge stock. Finally this study treats trade and income as endogenous and estimates the overall impact of trade openness on environmental quality in the short term and long term using the instrumental variables and dynamic structure model. Last is a summary of conclusion, policy implications and research prospects. Through theoretical and empirical analysis, the paper obtained the following main conclusions.1、Environmental Kuznets curve "Inverted U" relations or "Inverted N" relations is existence in China using an index of industrial waste water, industrial SO2, industrial soot and industries dust emissions. But, the per capital GDP under turning point is much lower than the result of the previous research being developed countries as a object.2、Under the condition of open economy, to the country participating in the international trade and international capital flows, growth in income is not a sufficient condition for eventual improvement in environmental quality. The EKC relation to emerge in the growth path of the economics are that the environmental policy of the economy should become increasingly strict with growth in per capital income. The shape of EKC will change independent on the resources endowment, the level of economic level of trade partner.3、However, we don’t find statistically significant evidence of the Pollution Haven Hypothesis using the OECD-China bilateral trade data in dirty industries(subdivision to ISIC3-level code) for three gas pollutants, controlling for trade openness and the share of national production from manufacturing, we find strong statistical evidences that some specific dirty industry imports are correlated with higher emissions. We assess the traditional income-emissions model with variables such as urbanization, trade openness and export and import of dirty industry in time series framework. Then find the "Inverted U" relationship for industrial dust becomes insignificant and pollution-income relations of industrial soot turns into "U" shape. Besides, Industrial waste water, industrial SO2, CO2’s "Inverted U" relations remain unchanged, the turning point of per capital GDP is lower and emission is higher compared the reduced EKC.4、The reason why the overall pollution emissions don’t increase with the production as the some pace is trade structure to more clean industry(structure effect) and using energy-saving and emission-cutting technology(technical effect). Furthermore, the impact of technical effect is much lager than structure effect.5、The environmental technical effect of international trade mainly embodied in that facing international competition and trans-national production cooperation, the company can assess to he advanced clean technology and emission-cutting technology from the developed countries. We build international and domestic knowledge stock using a patent-based measure of the technology frontier to test the diffusion and spillover of pollution-control technologies. Our research indicate that industrial waste water and co2emission in China are negatively related to environmental-related technology stock and the absorptive capacity of the economy to assimilate foreign technology. Our findings also indicate that greater trade openness tend to help China capture the clean technology transfer and spillover.6、There is a interaction "two-way" relationship among economic growth, international trade and environmental quality. Using structure equation treating trade and income as endogenous variables, We can find international trade have a positive net impact on environmental quality of China in the short-term and long-term. Furthermore, the scale-technical effect becomes more larger in the long-term and the negative technical effect dominates than the positive scale effect, so the long-term effect is bigger than the short-term one.