Environmental regulation and trade pattern：a case of China

As a growing number of countries, including both developed and developing countries, have in recent yearstaken environmental regulation at different levels, a question of great concern has been raised： can the regulation alterthe existing trade volume and trade pattern, and ultimately drive pollution-intensive industries to countries with low-levelregulations or even those without regulations at all？ Starting from the three different propositions concerning therelationship between environmental regulation and trade pattern, this paper applies cointegration analysis and errorcorrection model to empirically testing the relationship between environmental regulation and trade in China during theperiod of 1985-2005. Our empirical results indicate that in the short run the collection of pollution discharge fees bearsa positive impact on the export share of clean products of total exports. Thus, higher pollution discharge fees raise theratio of clean products exports to total exports. This further indicates that more stringent environmental regulationpromotes the exports of clean products. In the long run pollution discharge fees are positively correlated with the exportshare of clean products but negatively associated with their import share. Such correlations imply that environmentalregulation tends to facilitate the international specialization in line with comparative advantages.

Environmental regulation and trade pattern: a case of China

As a growing number of countries, including both developed and developing countries, have in recent years taken environmental regulation at different levels, a question of great concern has been raised can the regulation alter the existing trade volume and trade pattern, and ultimately drive pollution-intensive industries to countries with low-level regulations or even those without regulations at all? Starting from the three different propositions concerning the relationship between environmental regulation and trade pattern, this paper applies cointegration analysis and error correction model to empirically testing the relationship between environmental regulation and trade in China during the period of 1985-2005. Our empirical results indicate that in the short run the collection of pollution discharge fees bears a positive impact on the export share of clean products of total exports. Thus, higher pollution discharge fees raise the ratio of clean products exports to total exports. This further indicates that more stringent environmental regulation promotes the exports of clean products. In the long run pollution discharge fees are positively correlated with the export share of clean products but negatively associated with their import share. Such correlations imply that environmental regulation tends to facilitate the international specialization in line with comparative advantages.