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.  

The Crucial Role of International Trade in Adaptation to Climate Change

Climate change effects on agricultural yields will be uneven over the world with a few countries, mostly in high latitudes, that may experience gains, while most will see average yield decrease. This paper aims at quantifying the role of international trade in attenuating the effects of climate change by allowing the expression of the new climate-induced pattern of comparative advantages. To do this, we develop a quantitative general equilibrium trade model where the representation of acreage and land use choices is inspired from modern Ricardian trade models but also consistent with theoretical and empirical literature on land use choices. The model is calibrated on spatially explicit information about potential yields before and after climate change coming from the agronomic literature. The results show that the climate-induced yield changes generate large price movements that incentivize adjustments in acreage and trade. The new trade pattern is very different from the current one, showing the important role of trade flows in adapting to climate change. This is confirmed by larger welfare losses from climate change when adjustments in trade flows are constrained versus when they are not.

By Christophe Gouel

This piece concentrates on the effects of trade internationally on climate change. This is the idea that Gouel came up with is that large amount of imports and exports effect the domestic demand for the products. The producers of the agriculture have a decision to what to use their space for they would either use it for agricultural growth or for spaces for other labour to occur, like factory work. The main question that they have to ask themselves is which is going to return the most revenue throughout the year (regardless of the seasonal weather). Their stock diversification will be important in their maximization of profits to stay in line with the world demand of the products. 

In my opinion it is very important to regulate the use of agricultural growth and crops because it is taken that everything is available for free trade apart from the grass used as feed for the animals. And with growth of crops it would be expected that the demand and supply of the product is flexible. The demand for the crops for food in US in significantly higher than the consumption of crops that the world which isn't possible for America to sustain their own food consumption, which requires a high level of imported products from throughout the world which makes these products have a higher carbon footprint which effects the climate change in the world, which will have a great effect on what the world can produce in the future with the different weather conditions. Where the world population will continue to increase it will be very challenging on the worlds producers to meet the ever expanding levels of demand, but doing it in a way which is good for the environment, sustaining it as well as possible.

Asian Economies and The U.S.-China Trade War

Asian Economies and the Trade War

The growing tension in the tariff war between the U.S. and China is causing disruptions in multiple segments of Asian economies that are dependent on imports and exports to/from China. In the short run, multiple Asian economies will suffer disruptions in the technology and automobile sector; and these disruptions will mainly result in decreasing terms of trade for smaller Asian nations. However, more economies will benefit in the long run due to the sector migration of productive resources and domestic labor pools. 

This article primarily studies complex, unfinished goods that are exported from China to other nations before being finished and imported to the U.S., where they will be taxed by the additional tariffs. In the short run, these unfinished goods will be exported from China at a premium in order to recover the taxes that will later be applied upon their importation to the U.S. These premiums will increase prices of the goods in the intermediate shipping nations, which will increase the prices to U.S. consumers. These premium prices will also decrease the profit margins and revenue streams of the domestic industries within smaller Asian nations in the short run. However, these premium prices will encourage smaller nations to adapt their economies by mobilizing resources and labor pools to different sectors, which would increase the output and productive capabilities of smaller nations. By augmenting and reorganizing their productive capabilities, these smaller nations may benefit in the long run by increasing their international presence and utilization of domestic production. 

The growing tensions caused by tariffs and counter tariffs between the U.S. and China have created panic in international markets. The short run disruptions caused by these tariffs will cause profit and revenue reductions in smaller nations that import unfinished goods from China and export finished products to China for export to the U.S. However, in the long run, the smaller  nations may benefit from increased production and trade stemming from relocating their productive resources and labor pools to more profitable, alternative sectors of their economies. 

https://www.cnbc.com/2018/11/08/us-china-trade-war-countries-in-asia-that-will-be-winners-or-losers.html?recirc=taboolainternal 

Mexico, Canada play hardball on trade deal over steel tariffs

As the United States-Mexico-Canada Agreement talks are coming to an end there is pressure from Mexico and Canada for the US to restore the tariff exemptions on steel that the US originally revoked to put pressure on Mexico and Canada to come to an agreement. The US is worried however that if they do restore the exemptions this will allow China to hurt the US steel industry and is instead proposing a quota system for steel with Mexico and Canada. Neither country is happy with this proposal and do not understand why the exemptions can not go back into place now that they are tentatively scheduled to sign the USMCA in the end of November. Some people support the quota system proposal because they can be as effective as tariffs but unlike Tariffs the exporting country would get the money instead of the US getting the tariff money. Others however believe a quota system may create a political problem for the exporting country as the government picks and chooses what companies get allocated part of the quota amount. Though there may be another solution according to “Hugo Perezcano Diaz, deputy director of the international law research program at Canada's Centre for International Governance Innovation and a former NAFTA negotiator.” Diaz believes that talks of a quota system could lead the United States, Mexico, and Canada to adopt a closed North American steel market. Canada already has a similar safeguard in place that protects against imports of steel products from the rest of the world. Diaz thinks if Mexico were to implement a similar system, closing off the steel market in North America the U.S. may feel secure enough to eliminate the steel tariffs. 

I think that the US is smart not to implement the exemptions on the tariffs just yet. They have not officially come to an agreement with Mexico and Canada so I think the exemptions would be premature. I however don’t think that the quota system proposal will go through with Canada and Mexico and also may cause a rif in the relationship between the countries just as they are trying to come to an agreement. I think Diaz’s solution is very interesting and may be a smart move for the three countries while it will upset many other countries such as China, who the US is currently involved in trade talks with. Realistically, I do not know if Diaz’s proposal would ever be able to be implemented but I think it would be a viable solution for the United States, Mexico, and Canada.

https://www.washingtonexaminer.com/policy/economy/mexico-canada-play-hardball-on-trade-deal-over-steel-tariffs

UK and US pull out of Saudi event over alleged murder of Jamal Khashoggi

Summary of the Article

With the recent murder of Jamal Khashoggi, many countries have decided to pull out of the forum event held in Saudi Arabia. French finance minister, Bruno Le Marie, and Dutch counterpart, Wopke Hoekstra, confirmed they were withdrawing from the event on October 23^rd. The UK trade secretary, Liam Fox, and U.S. Treasury secretary, Steven Mnuchin, have recently pulled out of the forum in Saudi Arabia. President Trump will have to make an important decision to make due to a conflict with Iran. The main part of the conflict is that any country that imports oil from Iran could be imposed with sanctions and can’t risk counter sanctions by Saudi Arabia. Saudi Arabia is an important part for the U.S. because this is our main supplier for oil and don’t want to ruin trade relations.

My take on the Article

This might hurt Saudi Arabia’s trade relations with any of the countries they have trade with previously since they are not taking this case more seriously. Since Saudi Arabia is most known for their oil, this might affect their total exports to the countries they trade with. If more countries start to pull out, the more money Saudi Arabia could lose on their exports of oil. Also, since Saudi Arabia doesn’t seem to be taking this case very seriously, it shows that this doesn’t affect them as much as other countries. This is a terrible thing because any crime committed to a journalist of any country should be taken seriously. Finally, the U.S. cannot make any bad moves with Saudi Arabia because this is a crucial trade partner. The U.S. needs to have a meeting with Saudi Arabia’s prime minister and try and get the investigation going faster to figure out who did this to Jamal Khashoggi.

Source: 

https://www.theguardian.com/world/2018/oct/18/liam-fox-pulls-out-of-saudi-event-over-alleged-of-jamal-khashoggi

Migrant Caravan Nears Southern Border

Migrant Caravan Nears Southern Border

As many people have seen on the news, a large caravan of South American migrants is encroaching on the southern border of the United States. In order to provide insights on this issue, I will offer information regarding potential courses of action from both economical and humanitarian perspectives. 

Firstly, the economic impact from the mass resettlement would be primarily felt in the area in which a majority of the migrants select to settle, for the total size of the caravan is only roughly 4,000 people. While it is assumed that they would not have a large national impact in either the U.S. or Mexico, they may have a larger impact on local economies: lower local wages, lower returns to capital, and a higher labor supply are all consequences that would become evident in the local populations that accepted the migrants. Meanwhile, the populations that previously hosted the emigrants would experience slightly higher wages, higher returns to capital, and a reduced labor supply (under the assumption that the emigrants came from concentrated communities). 

The humanitarian aspect of this crisis is important as well. The migrants come primarily from the less-developed areas of Honduras and Guatemala, and many of the emigrants do not have the training to find work in positions for highly skilled labor. The lack of applicable skills needed to find well-paying work will drive many back into the poverty that they have tried so tirelessly to escape. One of the most practical ways to help the emigrants find work is for the United Nations to invest in the industries in the migrants' home nations. By having the United Nations collect contributions from many member nations, the impact of decreasing wages and MPL's would be greatly diffused and therefore reduced to negligible levels from the donor nations, while still increasing the wages and MPL's  for workers in the receiving nations. In addition to aiding the receiving nations while not detrimenting the donor nations, aiding in investment instead of resettlement would reduce assimilation costs for the migrants and assist in keeping family groups intact.   

  

China’s record trade surplus with the US shows Trump’s strategy is “failing”

Trump recently started a trade war with China, putting large tariffs on Chinese goods in order to lower the trade deficit between the US and China. So far though, it does not seem to be working. The trade deficit is reaching record highs this year. The deficit reached 34.1 billion this September, which is 13% higher than in 2017. So it does not seem that Trump's strategy is working. In fact, China has fought Trump's tariffs by purposely exporting more into the US and importing less, making up for where the tariffs should have made a difference. Trump's tariffs are hurting Chinese economy though, the IMF predicts that the tariffs could cause a loss of growth of 2% for China in the coming years. Though China isn't the only one hurt by these tariffs. Ford reported that they lost upwards of $1 billion due to the tariffs, which will cause lay-offs. 

I think that President Trump may need to rethink his strategy. While, with time, we may see the tariffs work and the trade deficit decrease, this is not guaranteed, and so far there are no signs of it happening. In fact the trade deficit has just continued to grow. I think Trump should rethink negotiating with China in order to come to a better trade relationship so that China might export less to the US, as right now they are fighting the tariffs by exporting even more than they did to the US. Trump came out strong in this trade war, implementing very high tariffs. I think that he should have started with negotiating with china and if that did not work he may have implemented slightly lower tariffs than he has now, in order to show China he was serious, without overly angering them.

https://www.vox.com/2018/10/12/17967422/china-trade-war-us-trump-deficit

Global Business Leaders and Saudi Arabia

The disappearance of Saudi Arabian journalist, Jamal Khashoggi, has global leaders very skeptical of future dealings with the middle eastern country. So, skeptical that global leaders such as, British billionaire Richard Branson, Uber CEO Dara Khosrowshahi, and more are suspending their ties with Saudi Arabia until further investigation. Khashoggi was last seen entering the Saudi consulate in Istanbul with marriage paperwork; Khashoggi has since been missing for a week. Saudi Arabian Prince Muhammad Bin Salman has been a  tyranny to his country, with throwing protesters in jail and being suspected of having goons beat a native satirist, and now suspected of killing a native journalist. It is an unclear motive but what does this mean for Saudi Arabia's export partners? The U.S. being one of many with a 9.8% import of petroleum and petroleum products. What will happen to terms of trade and welfare of Saudi Arabia if more global leaders start to fear future dealings with middle eastern country, afraid they may disappear too? I think both terms of trade and welfare will decrease. If Saudi Arabia can't export as much then they can't afford to import as much also. In turn meaning that Saudi Arabia won't have as much consumer goods. And SA won't have as much production since SA imports machinery and equipment, textiles, chemicals, etc. at a cost of $136.8 billion dollars. Their production will decrease and so will their welfare. If the findings happen to be against SA what course of action should be taken? I don't believe global leaders will completely stop importing goods from SA but they should be held accountable. Putting tariffs and sanctions does not seem like a stiff enough punishment. Their government seems to be out of control and that's a good place to start cleaning things up.

https://abcnews.go.com/International/wireStory/richard-branson-freezes-business-ties-saudis-58454809
https://www.realclearpolitics.com/articles/2018/10/12/why_do_we_care_about_jamal_khashoggi_138334.html
https://www.economist.com/leaders/2018/10/13/what-it-means-if-saudi-arabia-murdered-a-journalist-in-turkey

NAFTA Problems with the U.S. and Canada

Summary of the Article

There was a meeting for NAFTA and it didn’t go as well as the Canadians thought it would. Trump called the relationship between him and Prime Minister Justin Trudeau “testy”. Also, NAFTA is now called U.S.M.C.A. Most of the Canadians are mad not about the name change but because of other things that Trump has said and proposed to Canada. Canada is one of the U. S’s biggest importer of their goods and biggest source of international travelers. The relationship started to take a turn when the U.S. took action stating that the tariffs on steel and aluminum would go to Canada as well. To American citizens, we don’t know how it affects the Canadian citizens but the Canadians were mad about this proposed tariff. Then in August, Trump announced a deal with Mexico on NAFTA and suggested that Canada wouldn’t be included. Trump also would hit Canada would with a 25% tariff on their car exports if they don’t “negotiate fairly”.

My Solution to the Problem

What Trump did to the Prime Minister Trudeau was wrong and shouldn't have done what he did. Instead of trying and imposing tariffs to get what Trump wants, he should be trying to come to an agreement that both Canada and the U.S. can come to terms with. Both countries right now are not going to be happy with their terms of trade and should try and work out some agreement. As of now, Trump “patched” the U.S.M.C.A but didn’t really give Canada a say in their defense and made Prime Minister Trudeau and his cabinet even more mad at President Trump. Another proposal that could be the Trudeau should have spoken about the possible export tariff and could have came to a lower export tariff (10-15%) but I don’t know if president Trump would have listened to the negotiation.

Japan Embraces Bilateral Trade Talks with U.S.

Japan Embraces Bilateral Trade Talks with U.S. 

On September 26, the Japanese Prime Minister, Shinzo Abe, agreed to enter bilateral trade talks with President Trump after over two years of rejecting any offers for trade negotiations. The dispute between American and Japanese trading enterprises began after President Trump withdrew from the Trans-Pacific Partnership, which set trading precedents through a multi-lateral trade agreement between roughly a dozen nations. Many Japanese politicians feel as though they have been "chased into a corner" by President Trump's demands in regards to the potential threat of a 20-percent tariff on vehicles exported by Japan. However, most analysts believe that the new trade arrangements will be less extensive than planned, with the main purpose being to increase the amounts of agricultural products and military hardware exported to Japan. 

My Analysis

I personally believe that reentering an agreement such as the Trans-Pacific Partnership or using bilateral trading agreements under adjusted terms would greatly benefit the United States by increasing our terms of trade. Making alterations to our trading agreements will also benefit the partner nations as well by maintaining or increasing the amount of American products within foreign markets and the world market. An increase in the amount of products available to consumers would allow both foreign and domestic markets to reach higher, more extensive indifference curves, thus increasing overall satisfaction. Lastly, rejoining or making new trading agreements would support the profitability and sustain the exports of our foreign trading partners, thus allowing them to remain constant on their production frontier, one such example is the Japanese auto industry, which would export 200,000 fewer automobiles and experience a 2.2 percent decline in profitability if the United States imposed the 20-percent tariff. Renegotiating and reentering trading partnerships would greatly benefit both the U.S. and foreign nations: increasing U.S. terms of trade, increasing American exports and the variety of products on world markets, and stabilizing foreign industries are several effects of the new U.S. trading policy that will allow partnering nations to prosper. 

Trade War Between China and US

Regarding the terms of trade that we were discussing in class, the United States and China are not on good terms. In the articles "Trump threatens new tariffs on $267 billion of Chinese goods" and "China 'will retaliate' if the US imposes new tariffs on $200 billion of goods" from TheGuradian.com, there are talks that the terms of trade will be going down. In the first article, Trump plans on putting a tariff on $200 billion worth of Chinese goods imported to the US but can impose it to be worth $267 billion with a further package. With China having a trade surplus of over $31 billion as of August, Trump says he wants Beijing to make changes in economic trade and and technology policy. With this in mind, the terms of trade aren't equal between the US and China. With China at a big surplus and the US at a large deficit, there needs to be a compromise. Trump trying to impose a tariff on the imports might work for a little while, but in the end, it will hurt their trade relations along with hurting the global economy. With the second article, China will respond with retaliatory tariffs as well. However, they do share information that the trade gap between imports and exports rose from $4 billion to over $50 billion in July and China also imported $129 billion in goods from the US while exporting nearly quadruple the amount they exported to the US which was $500 billion. 

Now with the information that's given, I feel that there needs to be a change between the US and China because China accepts the US's imports but not willing to accept more while the US is buying more of China's exports but China isn't purchasing more of the US's imports. I do agree that there should be a tariff on the goods however, the tariff should be within a reasonable margin for the US to make up for some of the trade gap. The US has been dealing with this for a long time and have lost money for over 10 years to China and I feel that they need to work something out. The number that was thrown out by Trump was 25% on $50 billion worth of goods imported to the exported to the US. To me, that seems a bit steep and should go down to about 10% to start and see where it goes from there.

Sources: https://www.theguardian.com/technology/2018/sep/08/donald-trump-threatens-267bn-more-tariffs-on-chinese-goods

https://www.theguardian.com/business/2018/sep/06/china-retaliate-us-trump-imposes-new-tariffs-200bn-goods