Analysing the ASEAN–China Free Trade Agreement Effect on China's Environmental Sustainability Using Synthetic Control Method (SCM)

Abstract

This study evaluates the environmental impact of the ASEAN–China Free Trade Agreement (ACFTA) by modelling two major policy interventions: the 2002 signing phase, representing the initial liberalization commitments, and the 2010 implementation phase, marking the full elimination of tariffs and operationalization of the agreement. For Synthetic Control Model (SCM), a synthetic control unit needs to be constructed for comparison. The current study creates synthetic China from the weight shared by different predictor variables and the control units in the donor pool. Then, both synthetic China and China were compared after the intervention to determine the effectiveness of ACFTA. This paper offers a comprehensive evaluation of ACFTA effects on China's environmental sustainability using ecological footprint and carbon emissions as proxies for environmental sustainability. The study's outcome indicates that the ACFTA significantly enhanced carbon emissions and ecological footprint after both interventions, highlighting the inclusion of strict environmental regulation into the trade agreements. Further, it suggests policy intervention and international collaboration to eradicate the negative environmental impact of free trade agreements.