Does protectionism improve environment of developing countries? A perspective of environmental efficiency assessment.

Abstract

Past studies related to embodied pollutant accounting reported that free trade has increased the environmental pollution of developing economies, because the developed countries "outsource" their pollutants to developing nations. The COVID-19 pandemic has stimulated the rise of the most serious protectionism after World War II. This study is aimed to discuss whether protectionism improve the environment in developing countries by developing a comprehensive evaluation model, which integrates multi-regional input-output (MRIO), data envelopment analysis (DEA), and scenario analysis. We revealed the role of protectionism from two perspectives: the single impact on pollutant emissions and the comprehensive impact on environmental efficiency. Specifically, the capital inputs, labor inputs, energy consumption, economic output, carbon dioxide, sulfur dioxide and nitrogen oxides emissions related to global trade activities were simulated based on the MRIO. And then, sector-level trade environmental efficiency was computed by intergrading the MRIO and DEA using a non-radial directional distance function. Finally, the environmental efficiency of both developing and developed countries under two scenarios with and without trade were estimated. The results confirmed that trade has increased the CO2, SO2 and NOX emissions of developing economies by 12.9%, 9.8% and 12.3%, and has reduced that of developed economies by 6.0%, 29.4% and 21.2%, respectively. However, the results also uncovered that the environmental efficiency of developing and developed economies was dropped by 3% and 5%, respectively, under no-trade scenario. We contend that protectionism is not conducive to the sustainable development of developing countries because it lowers their environmental efficiency, although it may reduce their territorial pollutant emissions. For developed countries, the single impact of protectionism on pollutant emission reduction and the comprehensive impact on environmental efficiency are both negative.