IDEAS home Printed from https://ideas.repec.org/a/eee/jeeman/v82y2017icp74-103.html
   My bibliography  Save this article

Is Chinese trade policy motivated by environmental concerns?

Author

Listed:
  • Eisenbarth, Sabrina

Abstract

This paper analyses whether China's export VAT rebates and export taxes are driven by environmental concerns. Since China struggles to enforce environmental regulation, trade policy can be used as a second-best environmental policy. In a general equilibrium model it is possible to show that the second-best export tax increases in a product's pollution intensity. The empirical analysis investigates whether the export tax equivalent of partial VAT rebates and export taxes are higher for products which are more pollution intensive along several dimensions. The results indicate that the VAT rebate rates are set in a way that discourages exports of water pollution intensive, SO2 intensive and energy intensive products from 2007 on. Moreover, the conservation of natural resources such as minerals, metals, wood products and precious stones seems to be a key determinant of China's export VAT rebate rates. There is little evidence that export taxes are motivated by environmental concerns.

Suggested Citation

  • Eisenbarth, Sabrina, 2017. "Is Chinese trade policy motivated by environmental concerns?," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 74-103.
  • Handle: RePEc:eee:jeeman:v:82:y:2017:i:c:p:74-103
    DOI: 10.1016/j.jeem.2016.10.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S009506961630376X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hua Wang & Nlandu Mamingi & Benoit Laplante & Susmita Dasgupta, 2003. "Incomplete Enforcement of Pollution Regulation: Bargaining Power of Chinese Factories," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 24(3), pages 245-262, March.
    2. Karapinar, Baris, 2011. "China's export restriction policies: complying with ‘WTO plus’ or undermining multilateralism," World Trade Review, Cambridge University Press, vol. 10(03), pages 389-408, July.
    3. Richard E. Caves, 1976. "Economic Models of Political Choice: Canada's Tariff Structure," Canadian Journal of Economics, Canadian Economics Association, vol. 9(2), pages 278-300, May.
    4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    5. Chi-Chur Chao & Eden S. H. Yu, 2014. "Export Duty Rebates and Export Performance: Theory and China's Experience," World Scientific Book Chapters,in: TRADE-RELATED INVESTMENT MEASURES Theory and Applications, chapter 18, pages 259-272 World Scientific Publishing Co. Pte. Ltd..
    6. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 907-940.
    7. Simon J. Evenett & Johannes Fritz & Yang Chun Jing, 2012. "Beyond dollar exchange-rate targeting: China’s crisis-era export management regime," Oxford Review of Economic Policy, Oxford University Press, vol. 28(2), pages 284-300, SUMMER.
    8. Pothen, Frank & Fink, Kilian, 2015. "A political economy of China's export restrictions on rare earth elements," ZEW Discussion Papers 15-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Martin S. Feldstein & Paul R. Krugman, 1990. "International Trade Effects of Value-Added Taxation," NBER Chapters,in: Taxation in the Global Economy, pages 263-282 National Bureau of Economic Research, Inc.
    10. repec:wyi:journl:002196 is not listed on IDEAS
    11. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-160, February.
    12. Copeland Brian R., 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 44-65, January.
    13. Julien Gourdon & Stéphanie Monjon & Sandra Poncet, 2014. "Incomplete VAT rebates to exporters : how do they affect China's export performance?," Working Papers 2014-05, CEPII research center.
    14. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    15. Josh Ederington & Jenny Minier, 2003. "Is environmental policy a secondary trade barrier? An empirical analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 137-154, February.
    16. Jian Xie, 2009. "Addressing China's Water Scarcity : Recommendations for Selected Water Resource Management Issues," World Bank Publications, The World Bank, number 2585, June.
    17. Baldwin, Robert E, 1989. "The Political Economy of Trade Policy," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 119-135, Fall.
    18. repec:wsi:wschap:9789813141094_0009 is not listed on IDEAS
    19. Chandra, Piyush & Long, Cheryl, 2013. "VAT rebates and export performance in China: Firm-level evidence," Journal of Public Economics, Elsevier, vol. 102(C), pages 13-22.
    20. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters,in: International Economic Integration and Domestic Performance, chapter 9, pages 155-167 World Scientific Publishing Co. Pte. Ltd..
    21. Nikolaos Vlassis, 2013. "The Welfare Consequences of Pollution-Tax Harmonization," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 227-238, October.
    22. Branstetter, Lee G. & Feenstra, Robert C., 2002. "Trade and foreign direct investment in China: a political economy approach," Journal of International Economics, Elsevier, vol. 58(2), pages 335-358, December.
    23. repec:dau:papers:123456789/13784 is not listed on IDEAS
    24. Ray, Edward John, 1981. "The Determinants of Tariff and Nontariff Trade Restrictions in the United States," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 105-121, February.
    25. Ray, Edward John, 1981. "Tariff and Nontariff Barriers to Trade in the United States and Abroad," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 161-168, May.
    26. Jeonghoi Kim, 2010. "Recent Trends in Export Restrictions," OECD Trade Policy Papers 101, OECD Publishing.
    27. Chao, Chi-Chur & Yu, Eden S.H. & Yu, Wusheng, 2006. "China's import duty drawback and VAT rebate policies: A general equilibrium analysis," China Economic Review, Elsevier, vol. 17(4), pages 432-448.
    28. Piermartini, Roberta, 2004. "The role of export taxes in the field of primary commodities," WTO Discussion Papers 4, World Trade Organization (WTO), Economic Research and Statistics Division.
    29. Chen, Chien-Hsun & Mai, Chao-Cheng & Yu, Hui-Chuan, 2006. "The effect of export tax rebates on export performance: Theory and evidence from China," China Economic Review, Elsevier, vol. 17(2), pages 226-235.
    30. Caroline Freund & Caglar Ozden, 2008. "Trade Policy and Loss Aversion," American Economic Review, American Economic Association, vol. 98(4), pages 1675-1691, September.
    31. Yue, Changjun & Hua, Ping, 2002. "Does comparative advantage explains export patterns in China?," China Economic Review, Elsevier, vol. 13(2-3), pages 276-296.
    32. Cole, Matthew A. & Elliott, Robert J.R. & Wu, Shanshan, 2008. "Industrial activity and the environment in China: An industry-level analysis," China Economic Review, Elsevier, vol. 19(3), pages 393-408, September.
    33. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Q56; Q53; Q58; Q37; F18; Keywords:; China; Export VAT rebates; Export taxes; Trade policy; Second-best environmental policy; Air pollution; Water pollution; Energy intensity; Natural resources; Metal products;

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade
    • F18 - International Economics - - Trade - - - Trade and Environment

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:82:y:2017:i:c:p:74-103. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/622870 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.