The Impact of Trade on Environmental Quality: A Business Ethics Perspective and Evidence from China

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.