The subject of this paper is Environmental Regulations and International Trade. The paper reviews arguments and evidences on the impact of globalization about the environment. It analyzes the trade effects of environmental regulations and their effect...
The subject of this paper is Environmental Regulations and International Trade. The paper reviews arguments and evidences on the impact of globalization about the environment. It analyzes the trade effects of environmental regulations and their effective mechanisms on the basisof studying the trade export's patterns and directions of pollution-intensive products and examines the pollution haven hypothesis and porter hypothesis on evidence of environmental regulations and bilateral trade flows from global level. The result is that it could provide substantial theoretical evidences for designing and building of environmental regulations.
The dissertation is divided into five chapters. The first chapter is an introduction andthe second chapter is a survey of the theories and policies of trade and environment. The interaction between trade flows and environmental regulations has become quite a topical issue recently. There is a common belief that by applying more lenient environmental regulations, countries tend to reduce the production cost of their manufacturers and thus improve their ability to export. In chapter 3, the paper examines the international competitiveness through evidence of trade export's pattern and trade flow of 11 kinds of environmental sensitive industries. By taking into consideration the rank of pollution abatement costs. The data of 15 sample countries are from 1984 to 2010. Taking into consideration the rank of pollution abatement costs, the environmentally sensitive industries are classified, after which the paper determines the difference among the countries on the basis of various indices such as MS, RCA, ESI and MSER-ESDR.
In chapter 4 the paper shows how environmental regulations affect bilateral trade flows through global trade data. Demonstration model is an extension of the gravity model which includes environmental regulations index, environmental cooperation index and grade flows. The estimation is determined by applying regression analysis. In the examination of global perspective, the panel data of more than 150 sample countries from 2008 to 2009 are chosen.
Panel estimation of a gravity model of bilateral trade on the same data set reveals that, on average, polluting industries have higher barriers-to-trade cost, the conclusion of this evidences is that the relationship between stricter environmental regulations and pollution-intensive products becomes statistically significant, but more complex withfootloose pollution-intensive industries. While the domestic environmental regulation of importing country became stricter, the import demand of total pollution-intensive products increased accordingly.
The results show that the practice of multinational environment cooperation and the long-standing efforts of protecting global environment have a statistically significant effect on international trade flow, while multinational environment cooperation of importing countries decreases the international trade flow of pollution-intensive industries.
The paper has shown that environmental regulations are indeed an important variable in the determination of trade flows.