How do trade, Investment flows affect environmental sustainability? Evidence from Panel data in Southeast Asia
Abstract
The inter-linkage between investment flows and trade and environmental sustainability is an extensively researched area. It has been marked that FDI is increasingly being directed to the developing countries in recent period, whose export basket is generally more intensive in primary products and manufacturing products. In this background, the recent study contributes to the existing merge of research by managing a panel data empirical analysis over 2000-2014 for Southeast Asian 9 countries to understand the relationship between investment flows and trade and environmental performance index (EPI) for countries. The regression results reveal that while environmental sustainability of countries is negatively related with merchandise export orientation and FDI outward movements, it is a positively manipulated by service exports. The findings also confirm a positive relationship between several politic economic factors (e.g. abundant democratic set up and lesser corruption) and environmental performance of countries. The empirical findings lend proof to the competition that investment flows and trade significantly affects environmental sustainability of Southeast Asia countries.
Keywords Trade, Foreign Direct Investment, Environmental sustainability, Southeast Asia, Panel data
Paper type Research paper
1. Introduction
The international trade and
After analyzing the forestry problem described earlier, the problems are clearly linked domestic government policy and not only the giant multinational corporations as Ellwood has posited. The incentive for corporations to conduct cross-border trade is not the unperturbed environmental laws, it is the comparative advantage they would gain from cheap labor and resources. LeGrain advances the argument that approximately 80% of polluting industries are in industrial nations, such as America where Greenpeace affirms that oil corporations receive billions of dollars in subsidies for their production purposes which does the most environmental damage that affects the rest of the world with it. Initiatives should be started to reduce the Global South’s dependency on the Global North because it is their high debt-GDP ratios which keep the prices of natural resources (often tied to their currency) low enabling large consumption. There is a clear incentive for the international community to reduce the Global South’s dependency because it is widely agreed that as the GDP per capita of a nation increases the residents are able to afford environmental remediation products and
Wine production involves two parts of economic activity – viticulture and wine making in the winery. In the global context, wine production is dynamic due to the influence of globalization, technological advancements and extensive research. These have essentially influenced the nature, spatial patterns and the ecological dimensions of the wine industry.
It is this that has sparked China’s vulnerability to external shocks. In 2011, China’s exports amassed almost $2 trillion, however in Feb 2012, China recorded a $31.5 billion trade deficit as a result of the European sovereign debt crisis in which China’s main trading partners plunged into recession. China’s severe BOGS decrease is an attempt to control growth and a sustained level of 7.5%. Investment policies are also critical for China to achieve economic growth and development. Foreign Direct Investment (FDI) in China is being sought primarily in the redesign of State Owned Enterprises (SOE’s) and in the development of interior provinces. Between 75-80% of World Bank loans to China in 2008 were directed to the central and western regions, the most economically disadvantaged. This promotes increased wealth within China, leading to higher levels of development due to a more positive Human Development Index (HDI), which currently sits at 0.687, up from 0.677 in 2010. Thus, trade and investment are critical factors in ensuring that China’s growth remains sustained at 7.5% whilst still encouraging increases in development.
Following World War II, economic policies were marked by two major trends. On one hand, industrialized economies gradually removed trade barriers. These policies were based on the idea that free trade is not only a factor for economic prosperity of nations, but also for the promotion of peace. On the other hand, economic policies of many developing countries with the exception of few countries in Southeast Asia have been conditioned by the belief that the key to development rests in the establishment of a powerful manufacturing sector, and that the best way to create such an area was to protect local industries from international competition through substitution imports policies.
To what extent does globalization contribute to sustainable prosperity for all people? For example, when a company from one nation makes a trade agreement with another company in another nation they both may find prosperity. Likewise, when two nations agree to a treaty it makes quality of life go up in both nations because the threat of war is gone. Without globalization, we would not have as many products as we have today and that is why it makes us prosperous.
To cut costs, companies relocate their factories to areas with minimal pollution regulations to produce more with lower prices. Without tariffs, “trade without borders” become more much accessible and gratifying multibillion dollar corporations. Free trade agreements such as NAFTA and WTO do not consider the ecosystem and thus, endanger biodiversity and vital natural resources. Globalexchange.org states, the creation of free trade agreements imperil “global diversity by accelerating the spread of genetically engineered crops, … and erodes the public’s ability to protect our planet for future generations.” All in all, the absence of environmental regulations in free trade agreements severely damage the biosphere.
Over the past couple of years, countries and companies alike have taken the steps to ensure their citizens or employees are living an economically friendly lifestyle. This can be achieved by recycling programs, motion activated lights, and producing products with sustainable materials that do no harm to the trees or atmosphere. While countries like the United States and those in Western Europe have the capabilities to achieve this with advanced technology, education, and funds, the more poor countries of Earth still have to surrender themselves to unethical solutions. It is not only businesses in these regions that make these crucial decisions, but the government as a whole. A current example is the Nicaragua Grand Canal that is deciding to
Other studies have been completed that suggest evidence against an Environmental Kuznets Curve. It is safe to say that a nation with environmental regulations is a nation that is more developed and has higher income per capita, such that they can spare growth for protection of the environment. A nation that is less developed can’t make the sacrifice for the protection of the environment and must focus solely on economic growth.
While industrialization has been strongly associated with greenhouse gas emissions, it is premature, however, to conclude that economic growth is the independent factor responsible to climate change. Neumayer (1998) contended that there is no sound scientific evidence documenting consequences of economic development on the environmental degradation in the long term (p. 4). There is also no linear association between economic growth and environmental deterioration, as maintained by Ferguson et al. (1996, p. 28) that the existing evidence “cannot be used to justify a view that economic growth (…) will automatically be good or bad for the environment” (cited in Neumayer 1998, p. 16).
With economic globalization, international trade is developing and growing at an unprecedented rate. After China joined the WTO, international trade tariffs reduced significantly;many non-tariff barriers were also reduced. However, some countries have adopted some new trade restrictions in order to protect their industries and markets. The ‘green barrier’ policy is a kind of trade protection means which has been frequently used by the developed countries since the 1990s, it has created unequal trade relations for a vast number of developing countries and caused huge economic losses to these developing countries. It has become the new obstacle for international trade. Briefly, the problems are: first, an increase in the cost of enterprises, affecting the international competitiveness of enterprises and second, the implementation of ‘green trade’ barriers hindering the development of the Chinese export trade. This essay will examine these problems in more detail and seek to offer possible solutions.
But are environmental standards so necessary? Environmental protection seems expensive for less developed countries and is frequently seen as the luxury of rich nations. Yet evidence from econometric analysis of the influence of environmental standards on economic growth shows this simply is not true. The link between environmental protection and economic growth is particularly strong for developing countries, whose growth rates are particularly sensitive to changes in the supply and productivity of human capital.
2009). This in itself shows the high standards of sustainability can be made from free trade (Gidney, M. 2009). Fair trade provides two key benefits that can help with the current world economic crisis. First it provides sustained benefits for producers that can help maintain their business through fluctuations of the world market (Gidney, M. 2009). Second, fair trade helps to maintain fair prices, additional social premium, and long-term partnerships that help provide better living standards for millions of people in over 60 countries (Gidney, M. 2009).
The OECD is an intergovernmental organization that is focused on economics. It was founded in 1960 to help stimulate economics and world trade as it's members are mostly Western countries. By looking at patterns of growth and need in developing countries, they argue for the value of green growth, defined as "a matter of both economic policy and sustainable development policy” (OECD). There are two main ideas they identify that need to be focused on in developing countries, “the continued inclusive economic growth needed [...] to reduce poverty and improve wellbeing; and improved environmental management needed to tackle resource scarcities and climate change” (OECD). The report offers conceptual outlines for green growth in developing countries to follow, as well as calling for the international community to help create an environment that is conducive to green growth. These global efforts
Although humans know they are slowly damaging the environment in which they need to survive, they continue to do so. Dale (2001) asserts that it may be as a result of feeling powerless to reverse the situation; therefore their efforts are often futile. In order to truly see sustainable change, Dale (2001) believes there must be collaboration between different levels of government, and aggressive action taken. Throughout the book, Dale (2001) looks at sustainable development through three main lenses: ecological, social, and economic. She asserts that each lens is different, but equal in importance to make a more sustainable future (Dale, 2001). Although this book was written in the context of both Canada and the larger global society, I feel that Dale’s (2001) lessons are relevant to the United States, and are worth sharing for this book report project. Further, based on the examples of cities we have studied so far in Green Government Initiatives, it seems as though many cities are following her advice. This book review will consist of a further look at the three main components of sustainable development mentioned above, examples of how cities in America are applying the concepts, and will conclude with recommendations for the future.
Pollution, specifically global warming, is of growing concern to people and governments. It is a controversial issue whose validity is still being debated by scientists. The Kyoto Protocol is an international attempt to address global warming through emissions controls. Traditional neoclassical economic models do not incorporate pollution in rudimentary theories of supply, demand, or pricing, as a result, firms do not consider pollution as a cost of production, which leaves government regulation as the primary method for controlling these externalities. The goal of emissions trading is to allow one business, which can make greenhouse gas emission reductions for a relatively low cost, to sell