The impact of international trade on China׳s industrial carbon emissions since its entry into WTO

ABSTRACT "This paper employs the input–output (IO) approach to analyze the scale and structure of embodied carbon emissions of China׳s 19 industry sectors during 2001–2011 and constructs a regression model to establish the relationship between energy intensity, per capita output, trade openness, foreign direct investment (FDI), trade comparative advantage, environmental regulation, technology, and CO₂ emission intensity. Our results suggest that: China׳s international embodied carbon emission balance has been in a state of continuous growth for the period 2001–2011, and China has become a pollution haven; the relationship between per capita output and CO₂emission is inverse N-typed and China׳s industries are in the rising stage of the curve; FDI and trade comparative advantage are two main elements boosting China׳s carbon emissions; trade openness, environmental regulation, and technology will lower the growth rate of China׳s industrial carbon emissions (ICEs). Consequently, China׳s policies should center on adjusting the industry structure and scale of FDI inflows, transforming industries with trade comparative advantages into a clean type, facilitating environmental regulation level, and bringing in and developing low-carbon technology to avert China from being a pollution haven."

China’s carbon emissions have progressively gotten worse over the years 2001-2011. Trade comparative advantage is one reason, according to the abstract, that China’s carbon emissions have continued to grow. China has the ability to produce goods at extremely low costs, giving themselves a comparative advantage in many industries. One of the reason these low costs are possible, though, is because China has not adapted their production to be low-pollution creating and instead much of their production in these areas have high negative externalities, mainly being pollution. According to the abstract “trade openness, environmental regulation, and technology” are keys to China lowering their carbon emissions.

I think that China really needs to move industries into cleaner production. With environmental problems being such a great threat right now, all countries should be doing their best to reduce pollution. I think that other countries that are already making the move to be more environmentally friendly, should consider some kind of back lash for those countries that are not also moving to cut down pollution. This could be through tariffs or quotas on imports to these countries which production has high pollution externalities.

What Do Trade Agreements Really Do?

The economist I decided to do some research on was Dani Rodrik. The article is called “What Do Trade Agreements Really Do?”. While reading the article, I found it interesting how economists knew that free trade would create gains and losses but want to know how did the weight of the gains and losses reach a judgement that the US citizens would be better off “on average” (p.74).  To me it seems interesting because to me it seems like there is an easier solution to finding that particular answer, but it is actually so much deeper than that. There was a survey that concluded with the results that the US citizens would be better off “on average” as the result of NAFTA. The first topic he talked about was that TRIPs (Trade-Related Intellectual Property Rights) are a big part of an advanced countries’ gains which are a part of the developing countries’ losses. This is interesting because a TRIP can be a win-win for both parties but that is not how it would normally go. The second thing he talked about was that ISDS (Investor-State Dispute Settlement) procedures on how developing countries have traditionally signed onto ISDSs in the expectation that they would compensate for their weak legal regimes and help attract direct foreign investment. The only problem with that is that this gives arbitrators too much power which makes things difficult. The final topic he talked about was the pursuit of harmonization of regulatory standards. The harmonization differs between nations and also have dissimilar interests within consumer preferences or divergent regulatory styles (p.78). This is important to know because this is at the center of all trade agreements and want to know why we do certain things within agreements. In summary, trade agreements are signed by countries because some might be large countries and dominate the market or some are smaller countries that want an entrance into the market. Or the countries can be like the WTO and NAFTA where there is free trade among those nations that are part of an agreement. But the overall point is that trade agreements serve to empower special interests.

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.2.73 

Trump Bump From Trade Truce Should Lift Tesla, Daimler

https://www.thestreet.com/investing/stocks/trump-bump-from-trade-truce-should-lift-tesla-daimler-14807419

Things are looking up in the trade discussions between the US and China after the leaders of both countries came to an agreement to hold off on adding any more tariffs for 90 days in order to continue discussions. China is now considering lowering tariffs from 40% to 15% on American produced automobiles coming into China. With news of lowering tariffs, the automobile industry has seen increases in the stock market. One big beneficiary of the lowering of these tariffs will be Tesla, who only produces cars in the US.

While the reduction in tariffs is not a for sure thing yet, the fact that China is willing to consider the reduction bodes well for the trade talks between the US and China. It has become obvious during the trade war between the two countries that President Trump has no intention of backing down, so with China taking this first step, I am hopeful that this will lead to discussions that come to a trade deal within these next 90 days or so.

A reduction in tariffs by China will lead to more domestic production of automobiles, especially from the companies that may have shifted most of their production to other countries, like BMW and Daimler, had the tariffs been held where they are. Also with the possibility of a trade deal on the horizon spending will increase in the US, as the threat of more tariffs diminishes.

Decomposing the Environmental Effects of Trade Liberalization: The Case of Consumption-Generated Pollution

https://search.proquest.com/abicomplete/docview/1790884387/fulltextPDF/E25A8B698F7840A9PQ/2?accountid=28567

Abstract This paper investigates the effect of international trade on consumption-generated (“tailpipe”) pollution. For countries exporting the dirty good, trade liberalization increases its price, thus increasing domestic production and decreasing domestic consumption of dirty goods at the same time. This forces pollution from production and consumption to move in opposite directions, leading us to expect that trade-induced composition effects work differently for tailpipe and smokestack pollution. Our theoretical model predicts that capital abundance reinforces the pollution policy effect for tailpipe pollution, counter to the case with smokestack pollution. Empirical support for this comes from our analysis of an international panel of data on carbon monoxide emissions. We find evidence in support of an effect analogous to the pollution haven hypothesis, which has typically not been observed in previous literature. Thus trade liberalization may affect smokestack and tailpipe pollution differently.

This article by Bin Hu and Ross McKitrick states that the production of goods and the consumption of "dirty goods" pollute the environment in different ways relating to the method of usage or production. "Dirty goods" are goods that produce negative externalities in the form of pollution, these goods are commonly produced by capital-intensive economies where more stringent regulations force their taxation. Due to the taxation in more developed, capital-intensive nations, the consumption of dirty goods is lowered while the amount exported increases due to the higher prices available in foreign markets. They also deduced that free trade is beneficial in reducing pollution through free trade and exploiting economies of scale in production. However, they also discovered that increasing incomes lead to increasing levels of environmental pollution in such a manner that the reduction in pollution from exploiting economies of scale is more than offset by the income-produced pollution. 

These concepts are in direct relation to the topics that we covered in our last unit on environmental protection. The use of the Kunets Curve allowed Hu and McKitrick to determine that most countries fell into the range in which increasing income still causes increasing pollution, whereas Norway fell on the opposite side of the spectrum, in which increasing income actually decrease the level of pollution per person. In conclusion, Hu and KcKitrick's study shows that capital-intensive countries typically produce and export pollution-causing goods while enjoying lower levels of pollution in their home nations due to pollution taxes and more extensive regulations.