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Hidden cost of trade

(China Daily)
Updated: 2008-08-30 11:25

The Ministry of Environmental Protection reportedly started in July to assess the impact of the trade-related environment deficit.

The effort by the environmental watchdog is more than welcome.

With the rise of China as a global manufacturing power, the country has accumulated an enormous trade surplus in recent years. Meanwhile, the environment deficit it has registered through import and export is also huge, albeit elusive.

A quantitative analysis of the actual environment cost behind China's trade growth is badly needed. It will not only provide key information for adjustment of trade-related policies to reduce pollution but also heighten public awareness of environmental protection.

Rapid export growth has long served as a major driving force behind China's fast economic growth.

In June, China's export growth slumped from 28.1 percent in May to 17.6 percent year-on-year, triggering widespread concern over the weakening trade sector and its likely impact on the economy. But the country's export growth picked up in July, up 26.9 percent from a year earlier to reach $136.7 billion in spite of the gloomy global economic outlook.

Uncertainties stemming from a further global slowdown will surely affect China's robust export growth sooner or later. It is of concern to policymakers to avoid massive unemployment if some exporters are squeezed out of the market. But a more fundamental problem is to cut exporters' emission of pollutants.

While more and more "Made in China" products are exported to satisfy the demand of consumers around the world, the amount of energy and pollutants they consume and produce go up too, adding to the difficulties of energy conservation and environmental protection.

To pursue sustainable growth, the Chinese government has made it a top goal to cut energy intensity by 20 percent and discharge of major pollutants by 10 percent between 2006 and 2010.

The country has achieved some progress on pollution reduction. Emission of sulfur dioxide (SO₂), which belches from smokestacks and causes acid rain, fell by 4.7 percent in 2007 compared with 2006, while chemical oxygen demand (COD), a measure of water pollution, dropped by 3.2 percent.

It was heartening to see such progress on pollution control after the country failed in 2006 to meet its environmental target. But that is still not enough given China's industrial growth potential.

Early this year, the central government substantially slashed tax rebates for a large range of energy-consuming and polluting exports and banned the processing of some highly-polluting products.

Clearly, the authorities are serious about rooting out trade-related sources of pollution.

The new research by the Ministry of Environmental Protection will help reveal the actual environment cost Chinese exporters have long ignored. Accordingly, policymakers can then focus their attention on specific industries to reduce pollution more efficiently.

Calculation of the trade-related environment deficit also reminds us of the "Green GDP" designed to gauge real economic growth by deducting environmental pollution and resources consumption.

It will be technically difficult to determine the exact extent of environmental degradation and its impact on the economy. But it is worth trying to inform the public, as much as possible, of the environment price the country has paid for trade growth.