Research On The Environmental Cost Of Iron Products' Trade In China

Comparative benefit is the main motive for countries to engage in the international trade, which in the same time is also an important topic in academic community. But the present theories ignore the effect of the increasing "environmental cost" on the real comparative benefit attained by countries engaged in the trade, which leads to the deviation and lag of many models when they are being used to explain the real world. The "environmental cost" owns the quality of concealment and the negative effects also function indirectly, circuitously and gradually, so a great deal of exterior apparent comparative benefits can't reflect the real comparative benefit. Besides, without uniform environmental price and regulation system, the environmental cost in the exported goods from some countries especially the undeveloped countries are being terribly depreciated.We use the iron industry of our country as an example. Then estimate the elasticity index of the three effects and friction of trade and found that the main factors that deciding the pollution emitting of the iron industry are technical effect, composition effect and trade friction. Further, with the rising of trade volume, the pollution emitting will also climb up.Because the exported iron products in our country don't include the "environmental cost" that we really paid, this definitely leads to the "distortion" of comparative benefit we gain from the corresponding trade. Then, we analyze the effect of "environmental cost" on the comparative benifit, and explore the extent of the distortion in the comparative benefit quantificationally. More specifically, comparing with the international stand used in the developed countries, we estimate the opportunity cost of energy sources, the environmental cost of carbon dioxide and sulfur dioxide in our exported iron products, which will not be consumed if the production took place in the developed countries. The results show that there has been a huge distortion in our country's comparative benefit gained from the iron products' trade which can't be ignored.When a country exports goods, in nature it is exporting factor which is intensively used in the exported goods. The iron product is just one kind of our exported goods which consume a great deal of environmental resources. However, as a country lacking environmental resources, if we export such goods, we could pay for huge "environmental cost" and distort the comparative benefit heavily. That shows, the "environmental cost" of some products in the trade should immediately be recognized. So, we construct a way to adjust the "distortion" and provide some policy advice.