The Empirical Analysis on Environmental Effects Caused by China Foreign Trade

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1 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen 079 The Emprcal Analyss on Envronmenal Effecs Caused by Chna Foregn Trade Zhao Dfe, Zheng Weeng School of Managemen, Fuzhou Unversy, Fuzhou, P.R.Chna,35000 Team of NBS,Quanzhou Survey,Quanzhou, P.R.Chna, Absrac: Snce reform and openng up, as an mporan facor of economc groh, rade has promoed he developmen of Chna's economy sharply, a he same me, brough abou he desrucon of he ecologcal envronmen hch s he focus of academc debae. There s sll no any defne concluson abou he mpac of rade on he envronmen. In hs paper, by esablshng a measuremen model, e calculae he envronmenal effecs of rade from scale, echnology and srucure hree aspecs, concluson shos ha he srucure effec and echnology effec of lberalzaon of rade ll mprove he level of Chna's envronmen, bu he scale effec of rade hle promong economc expanson ll cause envronmenal damage. Key ords: Foregn rade; Envronmenal effecs; Scale effec; Technology effec; Srucural effec Snce he reform and openng up, Chna creaes an economc groh mracle, bu meanhle, Chna faces he ncreasngly serous envronmenal problems. Waer polluon, ar polluon and oher envronmenal problems brng h ndusralzaon becomng he boleneck of socal and economc developmen. And as radon and FDI promong economc developmen, heher hey generang and ncreasng envronmen polluon has become he focus of academc debae. Envronmenalss crczed ha, Chna's expor rade and absorbed FDI mosly n polluon-nensve ndusres, behnd Chna s foregn rade volume ncreased, here s envronmenal coss hch Chna borne for radng parners. Bu rade supporers consder ha, rade can promoe mprovemen of envronmen n long erm. Evaluae rade envronmenal effecs can no only smple examne he uly of rade volume groh on envronmen, s essenal o examne envronmenal effecs of rade comprehensvely from mulple perspecve as sze, echnology and srucure. Inroducon Snce 970s, envronmen problem ncreasngly ge aenon, here s a lo of foregn leraure sudes he relaonshp beeen nernaonal rade and envronmen. Research focuses on envronmenal polces effec on expor rade. There are specfc research on envronmenal polces on rade mehod, rade erm, and nernaonal compeveness; snce 90s of he 0 cenury, scope of sudy s der, ncludng rade lberalzaon effec on envronmen, norh-souh rade effec on envronmen, rade scale, he rade srucure, rade mehods effec on envronmen, rade polcy and envronmenal polcy coordnaon problems, economc mehods hch solve global envronmen problem, and free-rder problem n global envronmenal governance. On he mpac of rade lberalzaon on he envronmen, n curren academa o damercally opposed o pon of ve have been formed: envronmenalss consder rade lberalzaon drecly lead o he deeroraon of he envronmen, especally n developng counres hose envronmen polcy s loose. On hs ve s Chlchlnsky (994), Daly (993). On he oher sde, free rade supporers consder ha, even hough free rade can brng ceran envronmenal damage, bu hey consder he reason hy envronmenal damage occur manly s marke falure, so should no mprove envronmen hrough resrc rade. They also consder rade can generae polluon n ceran degree n shor erm, bu only hen radon develop o ceran sage, rade lberalzaon effec on he mprovemen of he envronmen (raonal use of resources, specalzaon, echnology mprovemen) ll bgger han polluon effec of rade Bhaga (993), Grossman and Krueger (99, 993), Anderson and Blackhurs (99) hold ha ve. In emprcal sudy, manly focus on valdae he follong hree problems: frs s heher rade leads developng counres o become polluon paradse. Lo and Yeas (99), Lucas and Wheeler (99), Hege (99), Beghn and Poer (997), WDean (004), Busse (004), Feng Helen Lang (005); second s rade and polluon heher n pour u-shaped curve relaonshp, Such as Grossman and Krueger (99), Bhaga (993), Grossman and Krueger (99, 993, 995), Lopez (994),

2 080 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen Sern(996). Thrd s heher counres compee o reduce envronmen sandard n order o proec he naonal produc, such as Easy and Geradn (997), Dua and Esy (997), Ropker(994). Whaever hch knd of hypohess, have no been go conssency pon of ve n academa. Hasheng Me (005) use Chna s panel daa and conclude ha rade ll deerorae he envronmen. X Du and lng Lu (006) consder rade has small effec on envronmen. Hongyan Guo and Lyan Han (008) consder envronmenal Kuznes hypohess s no esablshed n Chna. Shunu Huang and Yanxn Sh (00) consder rade can make developed counres envronmen mprove bu ncrease developng counres, especally emergng counres envronmenal polluon. The analyss Grossman and Krueger (99) do hen hey analyss he effec of he sgnng of NAFTA on envronmen, nae Trade-Envronmen General Equlbrum Analyss. Grossman and Krueger consder ha he mpac of rade lberalzaon on envronmen can be dvded no hree aspecs: scale effecs, composon effecs and echnologcal effecs. Aneler, Copeland and Taylor (00) buld a specfc model o subdvde he hree effecs. Ru Je (006) consders foregn rade s move mechansm of echnology progressng and ndusral upgradng. Yjun Yuan and Kun Dong (008) hnk rade can brng srucure opmzaon, and one of srucure opmzaon demand s conrol polluon n a reasonable level. Shujun Peng and Anpng Lu (00) consder he comprehensve effec of Chna s foregn rade on envronmen s negave, and snce Chna parcpae n WTO n 00, expor expand rapdly, make he expor srucure opmzaon can cach up h mpor srucure adjusmen, he proporon of polluon-nensve producs ncrease n expor, he prce of rade surplus s polluon surplus. Lanzhong Zhang and Tan Zhu (003), Tan Lan(004) use naonal cross-secon daa or panel daa and ge concluson: scale effecs pollue envronmen, bu echnologcal effecs and composon effecs mprove envronmen. Bed Yu (008) ge furher concluson: negave scale effecs n rade s over posve composon effecs and echnologcal effecs, hen rade ncrease envronmen polluon. Besdes, some scholars add energy no model, consder ha polluon emsson and he ype of energy used are n a grea relaonshp, hey furher decompose echnologcal effecs no nensy of energy use and nensy of energy use per un of oupu. Such as Hongmn Cheng(009) furher decompose echnologcal effecs no echnologcal effec of energy ulzaon and echnologcal effec of nermedae npu. Emprcal shos ha, from 99 o00, expor ncrease causes mpled energy expor ncrease, bu n 99 o 997, echnologcal effecs promoe mpled energy expor ncrease, s conrary n 997 o 00, echnologcal effecs may reduce mpled energy expor, need o be guded. Kun Luo (00) consder ha scale effecs and composon effecs of Chna s mpor and expor of polluon-nensve producs are negave, bu because of echnologcal effecs s posve, so ne effecs can be posve. Because dsoron exss n facor prce, make composon effecs negave, and resrc he posve effec of echnologcal effecs. Model We make use of he model founded by Werner Aneler, Bran R. Copeland and M. Sco Taylor(00). Assumpon : We assume ha homeland s a small open counres, h populaon N, and o prmary facors, ha labor L and capal K. Homeland and he orld boh have o ndusres, cleanng ndusry x and polluon-nensve ndusry x, cleanng ndusry doesn pollue and polluon-nensve ndusry generaes polluon as a by-produc. Homeland expors polluon-nensve producs. Assumpon : he producon echnology for x and x can be descrbed by un cos funcons c (, r) and c (, r), here and r denoe salary and Ineres raes. Assumpon 3: We assume consan reurns o scale, sandard zero prof and full employmen. Le x be he numerare, and denoe he relave prce of x by p. Snce exsng rade barrers, domesc prces ll no be dencal o orld prces, e re p βp. Where β measures he mporance of rade frcons and p s he common orld relave prce. The more β Read Werner Aneler, Bran R. Copeland, M. Sco Taylor. Is Free Trade Good for he Envronmen [J], The Amercan Economc Reve, Vol.9, No.4, pp

3 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen 08 close o, he more homeland open. I means here s no rade barrers, hle β. Denoe polluon emssons by z, Polluon s generaed by x producon. Frms have access o an abaemen echnology. z e( θ ) x () Where e(θ ) s emssons per un of x produced and s decreasng n θ, e assume e ( θ ) < 0, ( θ ) > 0 θ. e. If a frm allocaes x a per un x o abaemen, hen x a x The governmen uses polluon emsson axes o reduce polluon. Gven he polluon ax, he profs of polluon-nensve ndusry can be denoe as: π p N x L rk () And ne producer prce for gross oupu s: p N p( θ ) e( θ ) (3) Because of consan reurns, he frs order condon for he choce of mples: p e' ( θ ) (4) Hence θ θ ( /,and hen emssons per un oupu s: e e( / (5) The sandard zero prof and full employmen condons can be denoed as: L K N L K c (, r) c + c r, p c (, r) c + c r (6) K K K c x + c x L L, L c x + c x (7) Where c s he quany of facor j needed for producng per un oupu of x,,, j j K, L. We re he ndrec uly funcon of a consumer as: G / N v ( I, z ) U ( I ) δz U ( ) δz ρ ( p ) G / N Where G s naonal ncome, ρ( s a prce ndex, so I s real per capa ncome, ρ( and U s ncreasng and concave. Overall naonal ncome s prvae secor revenue plus rebaed axes, N so, G R( p, K, L) + z, hle prvae secor revenue s R( p N, K, L), s polluon ax rae. We assume he governmen chooses a polluon ax o maxmze he sum uly of every compuer, for e assume ha all consumers have he same uly funcon, he governmen jus need o maxmze he uly of every compuer. I solves N * v N v) The frs order condon yelds Then e have: di d dr ( N Nρ( dp max *(max di dz U ( I) δ 0 d d dp * N dz + z + ) d dz Nρ( d (9) Rearrangng our frs order condon as: Wh careful observaon (), e have ( p, I) Nδρ ( U ( I) (0) (8) We assume ha all consumers have he same uly funcon.

4 08 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen z ex ( e/ *( px) px e p px + x ( / )*( )*( ) px + x ε* ϕ* S Where ε ( e / means he pollung emssons of per un of oupu of x, hch s he mrror px of abaemen echnology, ϕ s he share of polluon-nensve ndusry, and px + x S px + x s he economc scale. Dfferenae (), hen e ge zˆ π ˆ ˆ Sˆ ε + π ϕ + π 3 () Where denoes percen change, he frs erm he rgh sde of () s he echncal effec, scale effec, he second composon effec, and he hrd scale effec. From () e kno polluon depends on he polluon nensy of he dry ndusry, e (θ ), he relave mporance of he dry ndusry n he economy, ϕ, and he overall scale of he economy, S, means ha e have only hree pahs o ncrease or decrease he emssons, ha can change he scale, composon or echnology. Scale Effec () Foregn Trade Composon Effec Envronmen Techncal Effec Fgure The Pahs by Whch Trade Change he Envronmen ()Techncal Effec(εˆ ) From (5)and(0), e ge ε e / p e(, / p ε (,, For p βp and ( p, I), so ε ε ( β, I) (3) ()Composon Effec(ϕˆ ) The producon of boh he o ndusres depend on (6) and (7). Usng he o equaons of (7), e ge he rao of o facors, K K K c x + c x L L L c x + c x Then e ge relave oupu L K x kc c K L x c kc Where K / L k. For c j s deermned by he relave prce of facors, ( r ), hch s depend on facor rao k, x x s only relaed h k.

5 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen 083 So, Rere (4a), px βp x ϕ (4a) px + x βp x + x x βp + x ϕ ϕ( β, k) (4) (3)Scale Effec ( Ŝ ) Usng (7), e can solve for oupus, L K L K c K c L c K c L x x K L K L L K K L c c c c c c c c, Smlarly, e ge x x ( k,, and rere he economc scale as: S px + x S( k, S( β, (5) We pu forard he follong proposons h src proof. Proposon : For a counry exporng, polluon-nensve producs, composon effec s posve. Foregn rade ll ncrease he share of x and ll pollue he envronmen. For rade lberalzaon ll rase he prce of x, h β larger and more close o. From (4a), e kno β ll make ϕ become larger. Proposon : For a counry exporng polluon-nensve produc, scale effec s posve. Holdng consan he mx of goods produced, ϕ, and producon echnques, e (θ ), he economy are smply scaled up, rade lberalzaon, ll ncrease he oupu of x vsbly, and desroy he envronmen. Proposon 3: Techncal effec can be posve and negave. Trade lberalzaon ll enlarge he scale, S, and rase he relave prce of x, p. The economc scale beng larger ll ncrease he ncome of consumer ho ll requre for more cleaner envronmen, and he governmen ll ncrease polluon ax rae,. The companes may ncrease or decrease he nvesmen on polluon reducon,θ, hle boh relave prce p and polluon ax rae ncreasng. 3 The Emprcal Analyss 3. Modelng, varable selecon and daa descrpon Accordng o equaon (), e can esablsh he follong lnear model: z a4 + a4ε + a43ϕ + a44s (6) Snce echncal change n he envronmen and by (3) and (4), accordng o second-order Taylor expanson, respecvely, a + a β + a β + a I + a I a β I (7) ε ϕ a + aβ + a3β + a4k + a5k + a6 β k (8) Equaon (7) and (8) are he echncal effecs, srucural effecs. Durng he nspecon of he relaonshp beeen envronmen and economy, e ofen use polluon concenraon or pollung emssons o measure he qualy of he envronmen. Seleced polluans mus mee o prncples: frs, selec he emsson of polluans hch assocaed h economc developmen s he dscharge of polluans durng he economc developmen; second, he emsson of polluans have negave mpac on economc developmen or he survval of human, oherse here s no research sgnfcance. Indusral sulfur doxde ( SO ) s man emssons brng by ndusral producon, and sulfur doxde, hch s an mporan cause of human respraory dseases and a major source of acd ran, have greaer harm on human lfe. For he above analyss, e use he sulfur doxde emssons ( SO ). And hgh-pollung ndusres used o calculae ε andϕ refer o ndusres

6 084 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen h hgh ndusral SO emssons. The seleced daa are based on "Chna Sascal Yearbook 00 " hch dvdes by ndusry oupu per mllon of sulfur doxde emssons up o en Indusry, hch accouns for he more han 90% of he ndusral SO emssons. Hgher SO emssons per un oupu ndusry. The varables used n hs paper and her calculaon mehods and meanngs as n Table. The daa of ndusral emssons n hs chaper are from varous years of "Naonal Envronmen Sascal Bullen", "Chna Sascal Yearbook" and "Compendum of Envronmen Sascs of Chna (98-990)." The oupu value of hgh-pollung ndusres s from varous years of "Chna Indusral Economy Yearbook" (he daa of 004 from he "Yearbook of he Frs Naonal Economc Census".) And varable daa requred for oher varables from varous years of "Chna Sascal Yearbook." All he daa relaed o prces are convered o 985 consan prces o elmnae prce facors. All daa use he form of logarhm o reduce he dsurbance of he heeroscedascy. We use Eves 5.0 sofare o calculae. Table Selecon of Varables n he Emprcal Par of Ths Paper Varable Un Name Mehod of calculaon ε on/0000rmb β % I RMB/person ϕ % k S RMB/person 00 mllon RMB polluon emssons of hgh polluon ndusry un oupu, reflecng he polluon level of echnology foregn rade dependence,reflecng he openng level of rade per capa ncome, hs arcle uses he per capa GDP hgh polluon ndusry n proporon of he GDP, o reflec he suaon of he ndusral srucure he rao of capal and labor, reflecng nave endomens economc scale z 0000 on emssons of SO he rao of emssons of SO and un oupu of ndusry h hgh emssons of SO he rao of oal mpor and expor volume and GDP he rao of he curren year GDP and populaon he rao of value of ndusry h hgh emssons of SO and GDP he rao of fxed asses nvesmen and he oal populaon The curren year GDP ndusral emssons of he curren year 3. Saonary es All varables are saonary or sngle hole s suffcen condon for a co-negraon relaonshp beeen varables, oherse may cause false reurn. Therefore, before he conegraon es e frsly mus be mplemenng saonary es o varables. Sably nspecon s ofen used o un roo es. Ths paper uses ADF es mehod. The sably of he varables resuls n able. From able e can see, all varables are frs order shee, here may have conegraon relaonshp beeen varables. Table Un Roo Tes Resuls Varables Inspecon ype(c,,k) ADF value The crcal level of 5% Concluson ε (c,,) non-saonary ε (c,0,) saonary β (c,,0) non-saonary β (c,0,0) saonary I (c,,) non-saonary I (c,0,3) * saonary ϕ (c,,) non-saonary ϕ (c,0,3) saonary k (c,,) non-saonary k (c,0,3) * saonary

7 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen 085 S (c,,) non-saonary S (c,0,3) * saonary z (c,,) non-saonary z (c,0,3) saonary Noe: means one order dfference of varable; n he ADF es form (c,, k), c for consan ems, s endency em, k as lag order number, he selecon crera of k s AIC creron. Mark * ndcaes 0% of he sgnfcan level don hrough saonary es. 3.3 The conegraon analyss Ths arcle uses he E-G o-sep mehod for conegraon es. The so-called E-G o-sep mehod s ha frsly hypohess here have conegraon relaonshp beeen varables, esmae coeffcen of equaon he equaon, and hen ake he saonary es for he resduals of equaon. If resdual can be smooh hen varables have conegraon relaonshp. Frs of all, e esmae equaon(6), (7) and (8). The resuls are n able 3. Table 3 OLS Esmaes Resuls Coeffcen Equaon(6) Equaon(7) Equaon(8) *** *** *** Consan erm ( ) ( ) (3.9669).075*** *** *** (8.6684) ( ) (.3757).083*** 3 (8.6684) no sgnfcan no sgnfcan.09*** 8.446*** -.056*** 4 (98.04) (8.3400) (-3.088) -.846*** 0.708*** 0.63*** 5 ( ) ( ) (3.3074).767*** 0.549*** 6 (.456) (.860) no sgnfcan AR(5) AR() 0.84*** (4.8804) *** (.60) DW sasc R AD.R F sasc Noe: he number n he bracke s sasc level of he esmaon of correspondng coeffcen. ***, **, * are respecvely he sgnfcance level of %, 5% and 0%. Sandard "no sgnfcan" means he coeffcen of varables n he OLS esmaes are no sgnfcan, so e ll elmnae hem o esmae agan. We can be seen from able 3 each equaon all hrough he F nspecon. The hole equaon s sgnfcan. Makng un roo es o he resdual seres of equaon, and he specfc resuls can be seen n able 4. We can see he resdual of equaon are zero order sngle sharp, ruled ou false reurn. Therefore, e can consder ha he explanaon varables and be explaned varables of each equaon have conegraon relaonshp. Table 4 Resdual Inspecon Resul Equaon Inspecon ype(c,,k) ADF value The crcal level of 5% Concluson Equaon(6) (0,0,0) saonary Equaon(7) (0,0,0) saonary Equaon(8) (0,0,) saonary 3.4 The resul analyss Equaon (6) reflecs he sze of he hree knds of effec ha rade makes o openng up. From he esmaed resuls e can see he coeffcen of S, ε andϕ are close o.0. The scale of economy ncreases every %, he emssons of SO ll be ncreased by.0%. The dranage echnology mprove

8 086 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen % or polluon nensve dropped %, and he emssons of SO ll be reduced by.0%. Calculaon under he same prce n985, from 985 o 009 years, economy expanded abou 9.54 mes, polluon emssons echnology has ncreased nearly 0 mes(he polluon emsson of un oupu s abou /0 of 985). Bu oal polluon ndusry also enlarged mes. The damage made by he scale effec o he envronmen offses he mprovemen of echnology effec o he envronmen, herefore, Chna's emssons of SO has expanded for abou mes compared o 985. Equaon (7) reflecs he echnology effec made by openng rade o he envronmen. The coeffcen of β s Trade openness each ncreased %, he emssons of per un of oupu of polluon nensve ndusry ll be reduced by 4.76%. The rade has grea smulave effec o echncal and envronmenal provde. In addon, he per capa GDP also have grea nfluence on polluon level. The coeffcen of I and I, ha s 4 and 5, ere and Envronmenal echnology level and I have a U curve relaonshp, hch means ha here exss nflexon pon. When I > (ha s per capa GDP more han 500 RMB), per capa GDP ll ncrease he emssons of SO. In 009, Chna's per capa GDP calculaed h 985's consan prces s abou 633 RMB, hch s far less han 500 RMB. Ths shos ha he groh of Chna's per capa GDP helps o he mprovemen of he envronmen. Equaon (8) reflecs he srucure effec. The coeffcen of β s Trade openness each ncreased %, GDP of polluon ndusry ll ncrease 0.39%. Chna's foregn rade developmen srucure s he ncreasng proporon of he polluon-nensve ndusres. And he ndusral srucure ϕ and he average fxed asses nvesmen k has poured U curve relaonshp, here s a urnng pon ( k 0900RMB / person). When k s more han 0900 RMB/person, he ncrease of capal compared o labor ll force he proporon of pollung ndusres o declne. Bu n 009 he average Chnese nvesmen n fxed asses s only 400 RMB, hch have no acheved nflecon pon. Chna should connue o ncrease nvesmen o fxed asses per capa and reach nflecon pon value as soon as possble. Openng rade dd no brng he mprovemen of srucure. The mprovemen of he envronmen hch s made by rade hrough mprovng envronmenal echnology level far oueghs he polluon brough abou by he srucure deeroraon. 4 Concluson and Advce for Furher Research Ths paper res o analyss scale effecs, composon effecs and echnologcal effecs ndependenly. From analyss resul can see, developmen of rade can promoe level of envronmen echnology, bu scale effecs and composon effecs deerorae envronmen. Level of envronmen echnology and GDP per capa are n U-shaped relaonshp, ndusral srucure ϕ and fxed asse nvesmen per capa are n nvered U-shaped relaonshp, currenly, GDP per capa and fxed asse nvesmen per capa are no mee he nflecon pon. Ths ork s only a prelmnary exploraon, here are many areas for mprovemen. Frsly, hs paper does no ake reacon of envronmen and envronmen polces on rade and economc no accoun, he esmae of model has a ceran bas; secondly, because hs paper only seleced so emssons as ndcaor of envronmen polluon level, no ye fully reflec he mpac of rade on envronmen. So n fuure research, e can make envronmen polluon (ncludng amospherc envronmen, aer envronmen, land, and so on) loss monezaon hrough sudy, hen compare h he benefs of rade, hs can be fully reflec he envronmen damage caused by rade; hrdly, hs paper only consder he envronmen polluon caused by expor counry producon, neglec of polluon problems caused by ranspor, mpor, consumpon, ec. e can ry o pu hese facors no model. References []Copeland B., Taylor M. Trade and Transboundary Polluon[J]. Amercan Economc Reve, 995, 85(4):0-35 [] Werner Aneler, Bran R. Copeland, M. Sco Taylor. Is Free Trade Good for he Envronmen [J]. The Amercan Economc Reve, 00,.9(4): [3] G. Gandolfo. (Xaomng Wang, ec ranslae) Inernaonal Economcs[M]. Bejng: Chna Economy Press, 999:78-37 (In Chnese)

9 Proceedngs of he 8h Inernaonal Conference on Innovaon & Managemen 087 [4] Guozhu L. Quanave Analyss Of Economc Groh and Envronmen Coordnae Developmen [M]. Bejng: Chna Economy Press, 007:37-45 (In Chnese) [5] Guangzhong Ouyang, ec. Mahemacal Analyss, Nex Volume [M]. Shangha: Fudan Unversy Press, 003 (In Chnese) [6] Shujun Peng, Mngyong La, Qun Bao. Envronmen, Trade and Economc Developmen Theores, Models and Emprcal [M]. Shangha: Shangha Jon Publshng, 003:56-67(In Chnese) [7] Jehle G.A., Reny P. J. (Gengbe Wang ranslae) Advanced Mcroeconomc Theory [M]. Shangha: Shangha Fnance Unversy Press, 00:3-3(In Chnese)