International environmental regulation, trade liberalization, and enterprise pollution reduction: Evidence from China

Abstract

Regarding the signing of the China–ASEAN Free Trade Agreement (CAFTA) as a quasi-natural experiment, this article uses the difference-in-differences model to examine the pollution emissions of domestic trading enterprises in the face of varying trade openness under international environmental regulations. It is found that trade liberalization will drive domestic trading firms to choose more proactive pollution abatement strategies, namely, the signing of CAFTA facilitates pollution reduction in enterprises trading mainly with CAFTA members. This effect is more significant in non-state-owned enterprises and labor-intensive enterprises. In particular, the effect of becoming a member of CAFTA to facilitate firm-level pollution reduction has a time lag, and its marginal effect tends to expand over time.