Research On The Environmental Effects Of Processing Trade Of Guangdong Province

As the most important trade pattern, processing trade has played a significant role in boosting the economy, upgrading industrial structure and supplying jobs. Guangdong province, of which the processing trade ranks the 1st in China, has achieved rapid economic development with the help of processing trade. Nevertheless, the scarcity of resources has been ignored by traditional international trade and investment theory through cost externalization and restrained by economic development and financial system. Local government and some enterprises have been recklessly in pursuit of economic and trade growth, making the negative effects of processing trade on the environment more and more noticeable.This paper has analyzed the influential factors and the mechnism of processing trade of Guangdong province on the environment and calculated the environmental pollution cost on the basis of relevant knowledge and theory of international trade and environmental economics. As to the empirical analysis, through static research which involves the application and improvement of the general equilibrium model and dynamic analysis which consists of Unit Root Test, Co integration Test, Granger Causality Test and VAR, the paper reached a general conclusion that with the scale, structural and technical effects being taken into consideration, the processing trade of Guangdong province has negative influence on the environment whereas the environmental policy has proved to be effective on reducing pollution.In the end, the paper emphasized the importance of processing trade on our economy despite its temporary negative effects on the environment and brought forward some advice on how to realize the benign cycle between processing trade and the environment in terms of upgrading processing trade, rationalizing the trade structure, increasing information efficiency and strengthening incentive compatibility.