Judith Dean

As the search for resilience alters global value chains (GVCs), many developing countries hope to benefit from GVC participation. China's heavy reliance on GVC trade and its high pollution levels suggest that such benefits may come at the cost of the environment. Yet direct evidence on environmental effects from GVCs is limited. This paper proposes that GVCs and foreign investment can reduce pollution intensity through three channels: greener technologies, a wider range of local tasks, and learning. Drawing on the Copeland-Taylor trade and pollution model and the Feenstra-Hanson outsourcing model, we demonstrate this possibility. We then test this hypothesis using Chinese industrial SO 2 and chemical oxygen demand emissions data. We develop two measures of the range of GVC tasks: a variant of the export extensive margin, and an adaptation of firm import and export upstreamness. Results suggest that GVC participation reduced industrial emissions intensity in China through all three channels.

The growth of global value chain (GVC) trade and the opportunities it can bring to developing countries have become well known. Yet some argue this trade allows industrial countries to offshore the dirtier parts of their production process to poorer countries. China's growth, heavily reliant on export production, FDI, and GVC trade, suggests a link between these and high pollution levels. Yet direct evidence of the effect of GVCs on the environment is limited. This paper proposes that GVCs can reduce pollution intensity through changing production technologies, expanding the range of productive activities, and transferring knowledge to domestic firms. Drawing on the Feenstra-Hanson (1996) outsourcing model, we develop a theoretical framework demonstrating the possibility that GVCs could reduce pollution intensity through these channels. We then test these hypotheses using Chinese industrial SO2 and chemical oxygen demand emissions data from 1998-2006. We develop two new approaches to capture the range of GVC activities: a variant of the extensive margin of exports, and an adaptation of the upstreamness of firm exports and imports. Results suggest that GVC participation has reduced emissions intensity through all three channels.

"This title was first published in 2002: The interrelationship between international trade and the environment has become the subject of much heated debate. These complex and strong concerns are given voice in this comprehensive and accessible text that brings together the leading journal articles dealing with the fundamental questions about this most important international problem. International Trade and the Environment offers an invaluable source of contemporary international research for all those researching, studying or practicing across the fields of international trade, environmental economics, applied microeconomics and other related areas."--Provided by publisher.