Abstract
This paper summarizes the arguments and counterarguments within the scientific discussion on the issue of the environmental impact of trade liberalization in the business ethics perspective. The main purpose of the research is to estimate different effects of trade on environment performance, namely the scale effect, technique effect, and trade-induced composition effects. Systematization literary sources and approaches for solving the problem of trade and environment indicate that they ignored country-specific factors and different economic development stages. The relevance of the decision of this scientific problem is that the research will provide profound insights on the impact of freer trade on the environment. Investigation of trade and environment performance in this paper is carried out in the following logical sequence: literature review, model specification, empirical estimation, and discussion. Methodological tools of the research are panel regression of data at the provincial level over the time period from 1997 to 2008. The object of research is China because China has experiences of fast development in trade. The paper presents the results of an empirical analysis by panel regression techniques for the estimation, which shows that trade itself has significantly positive effects on the environment. The research empirically confirms and theoretically proves that the impacts of trade liberalization on environment performance differ from pollutant to pollutant, and it rather depends upon the specific indicator in question. The results of the research can be useful for a number of policy implications for China as well as other developing economies in terms of business ethics. Keywords: trade liberalization, China, environmental quality, business ethics.
Highlights
In recent years the topic of the impact of trade liberalization on the environment has become a focus of attention for academics and policy makers. Jayadevappa and Chhatre (2000) establish some of the links between international trade and environmental quality by performing a comprehensive literature review
Following Grossman and Kruger (1993), Antweiler, Copeland and Taylor (2001) divided trade effects into three specific effects. They summed up the scale effect, composition effect and technique effect to find an overall effect of trade liberalization on environment performance
The technique effect captured by income per capita are significantly positive across the three Models for both wastes, but the square of income per capita is significantly negative
Summary
In recent years the topic of the impact of trade liberalization on the environment has become a focus of attention for academics and policy makers. Jayadevappa and Chhatre (2000) establish some of the links between international trade and environmental quality by performing a comprehensive literature review. Grossman and Krueger (1993, 1995) were the pioneers to conduct the empirical research on the effects of economic growth and international trade on the environment In their works, Grossman and Krueger (1993, 1995) decomposed the impact of trade on the environment into scale effect, composition effect and technique effect. Theorized and modeled explicitly trade openness as an explanatory variable was not used until Antweiler, Copeland and Taylor (2001) They examined it for the impact of free trade on environmental quality. Following Grossman and Kruger (1993), Antweiler, Copeland and Taylor (2001) divided trade effects into three specific effects They summed up the scale effect, composition effect and technique effect to find an overall effect of trade liberalization on environment performance. Extensions and modifications to this model have been made since by many other researchers
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