Ka Zeng - Joshua Eastin - Greening China - The Benefits of Trade and Foreign Direct Investment-The University of Michigan Press (2018)
Ka Zeng - Joshua Eastin - Greening China - The Benefits of Trade and Foreign Direct Investment-The University of Michigan Press (2018)
Ka Zeng - Joshua Eastin - Greening China - The Benefits of Trade and Foreign Direct Investment-The University of Michigan Press (2018)
Michael J. Gilligan
Empowering Exporters: Reciprocity, Delegation, and Collective
Action in American Trade Policy
Thomas H. Oatley
Monetary Politics: Exchange Rate Cooperation in the European
Union
Robert Pahre
Leading Questions: How Hegemony Affects the International
Political Economy
Andrew C. Sobel
State Institutions, Private Incentives, Global Capital
Roland Stephen
Vehicle of Influence: Building a European Car Market
William Bernhard
Banking on Reform: Political Parties and Central Bank
Independence in the Industrial Democracies
William Roberts Clark
Capitalism, Not Globalism: Capital Mobility, Central Bank
Independence, and the Political Control of the Economy
Kerry A. Chase
Trading Blocs: States, Firms, and Regions in the World Economy
David H. Bearce
Monetary Divergence: Domestic Policy Autonomy in the Post–
Bretton Woods Era
Greening China
The Benefits of Trade and Foreign Direct Investment
A CIP catalog record for this book is available from the British
Library.
ge190.c6z45 2011
333.720951—dc22 2011003378
Page v →
Acknowledgments
Finally, we would like to thank the two anonymous referees for their
constructive comments and Melody Herr at the University of
Michigan Press for her support of this project at various stages of the
publication process.
Page viii → Page ix →
Contents
PROVINCIAL-LEVEL ANALYSES
FIRM-LEVEL ANALYSES
NOTES
BIBLIOGRAPHY
INDEX
Page x → Page 1 →
CHAPTER 1
Theoretical Contentions and Analytical Approaches
The debate over the effects of trade liberalization and foreign direct
investment (FDI), or economic “globalization,” on environmental
protection has generated intense scrutiny from environmentalists,
policymakers, and academics alike. On the one hand, many
economists and globalization proponents contend that the economic
gains captured from free trade and FDI offset environmental damage
by increasing host-country wealth. In their view, increased wealth
empowers citizens and enables higher levels of domestic investment
in environmental protection.1 On the other hand, environmentalists
and trade critics argue that a reduction of trade barriers and an
increase in FDI should increase environmental pollution, especially
in less-developed countries (LDCs) that lack the willingness or
capacity to maintain stringent environmental regulation.2 They
argue that in order to remain competitive in a global environment,
developing-country governments have incentive to reduce
environmental regulatory standards to attract increased levels of
foreign investment and maintain competitiveness in export markets.
This process generates a “race to the bottom” (RTB) among political
jurisdictions competing for investment and low-cost export
production. Investors motivated by cost savings seek out these
“pollution havens” (PH) to establish production operations, creating
a vicious circle of diminishing regulation and increasing pollution.
Page 5 →
Second, the same factors that help explain why financial incentives
are not lucrative enough to induce MNC pollution-haven-seeking
behavior also help us understand why increasing trade and foreign
direct investment in China do not necessarily jeopardize the Chinese
environment. Provincial officials should be reluctant to jeopardize
long-term economic growth by engaging in environmental
deregulatory competition because it may engender provincial
reputation costs that deter future investment and subject Chinese
exports to increased regulatory scrutiny in developed markets. In
addition, even in absence of reputation costs as a deterrent,
provincial officials are unlikely to use this strategy simply because it
is not likely to be effective. Overall, we expect that China's provincial
governments are more concerned with ensuring the global
marketability of their existing export base and the sustainability and
effectiveness of existing environmental policies. In a transition
economy heavily dependent on exports, the importance of
unencumbered access to global export markets outweighs any
potential cost benefits of enabling “dirty” production. Because
provincial governments are charged with increasing economic
growth within their provinces, threats to major export market access
can be quite powerful.
At the firm level, we expect firms to transfer environmental
standards enshrined in developed-world import markets, such as the
United States and the European Union (EU), through trade
networks, along the lines of Vogel's trading-up argument.17 Firms in
China that export to environmentally stringent Page 7 → consumer
markets face considerable threats from the erection of environmental
trade barriers. Whether or not those threats are great enough to
encourage sustainable behavior is likely a function of the level of firm
export dependence and the strength of environmental regulation in
export markets. Further, similar to Prakash and Potoski's investing-
up argument, MNCs originating in environmentally regulated
markets are increasingly mandating continuity in environmental
regulatory norms between the home office and subsidiary operations
in China to avoid increased transaction costs and to streamline
international trade. In all but a few heavily polluting industries, the
residual cost savings derived from degrading local environments
does not outweigh the risk of high reputation costs if an MNC, its
subsidiary, or its supplier is linked to environmental destruction.
This argument can also be applied to domestic firms, as MNCs could
potentially use environmental performance as a supplier-selection
criterion. Environmentally conscious supplier selection should
instigate domestic firms to self-regulate their environmental
performance to meet developed-world standards.18 In addition,
environmental technology developed in response to regulatory
pressures in highly developed markets can be transferred to
subsidiaries via MNC networks. This can increase both intrafirm
operational efficiency and competitive pressure on host-country
firms, encouraging them to environmentally innovate.
This book locates its analytical foci in both provincial-level and firm-
level responses to the pressures generated by integration into the
world market. Our emphasis on subnational policy outcomes at the
provincial level is appropriate due to the substantial variation in
Chinese provinces' level of integration into the international market
and semiautonomy with regard to enforcement of jointly mandated
environmental policies. First, the geographical distribution of trade
and foreign direct investment in China is highly uneven as coastal
provinces were the first to reap the benefits of liberalization policies
and were thus a step ahead of inland provinces in attracting foreign
trade and direct investment. This asymmetrical distribution
produced a dramatic dichotomy of living standards among coastal
and inland provinces and led to variation in both supply and demand
of environmental policy enforcement. Second, there is also a
significant disparity among provincial governments in their
willingness to enact or enforce compliance with national
environmental laws.20 This stems in part from the wealth generated
by the coastal provinces' geographical advantages in investment and
trade attraction and from the ongoing process of power
decentralization from Beijing to regional governments. This
devolutionary process provided provincial authorities with more
autonomy vis-à-vis the Page 9 → center and enabled regional
innovation to contribute to market-oriented reform.21 It also gave
provincial governments a much larger stake in environmental policy
implementation and enforcement.22 Such provincial autonomy can
lead to competition in environmental as well as economic
performance. Factors such as political leadership, citizen
participation, different economic policies, and different degrees of
exposure to global environmental practices all play a part in
determining the willingness and capacity of a province or
municipality to enforce existing environmental regulation.23 Thus,
the substantial variation in Chinese provinces' level of integration
into the international market and provincial variation in policy
implementation and enforcement provide a suitable testing ground
for competing arguments about the linkage between globalization
and environmental protection.
CONTRIBUTIONS
Page 15 →
Page 16 →
Empirical results are mixed. On the one hand, some analyses find
evidence that MNCs deliberately seek out areas of lax environmental
regulation to avoid pollution control costs in regulated markets.8
Some studies also find that plant location decisions or other types of
FDI are driven at least in part by disparities in environmental
regulatory stringency across jurisdictions.9 For example, in a recent
analysis of the investment behavior of European firms in twenty-five
countries, Spatareanu discovered that a higher level of
environmental regulatory stringency in the investor's home country
relative to that of potential host countries indicates a higher
probability of outward investment from regulated to less-regulated
markets. The investment flows were also positively correlated with
investment volume.10 Alternatively, studies in different contexts
have been unable to generate convincing supportive evidence that
regulatory stringency is a primary determinant of firms' location
decisions.11 Javorcik and Wei found no evidence that firms engaged
in pollution-intensive activities are more likely to invest in locales
with weak environmental institutions or institutional enforcement
capacity in eastern Europe.12 Similarly, in an analysis of the
investment behavior of Japanese firms in five highly polluting
sectors, Kirkpatrick and Shimamoto found evidence suggesting that
the quality of regulatory framework actually had a much greater
influence on investment decisions than level of environmental
regulatory stringency.13 In Latin America, Birdsall and Wheeler find
that more pollution-intensive industries actually tend to be located in
more protectionist countries.14 Using data on U.S. foreign direct
investment in both developed and developing countries, Anderson
and Kagan suggest that U.S. firms engaging in pollution-intensive
production are also more likely to be located in countries with more
stringent Page 18 → environmental standards.15 In reviewing the
existing literature on the PH and RTB propositions, Arik Levinson
writes, “The conclusions of both the international and domestic
studies of industry location are that environmental regulations do
not deter investment to any statistically or economically significant
degree.”16 In any case, it is fair to say that previous work has left the
issue as an open-ended question.
Page 20 →
Exports account for over 30 percent of China's GDP, and the North
American and European markets account for over 40 percent of
Chinese exports. Thus, both foreign and domestic firms in China are
clearly dependent on highly environmentally regulated markets for
sales. Recent scandals resulting from poor corporate regulatory
practices in Chinese-produced goods, such as those associated with
pet food, toys, toothpaste, and pharmaceuticals, lend credence to the
idea that regulators and consumers in developed markets are paying
more attention to imported product content and production
methods. Though not directly linked to environmental pollution
emission in China, the negative international exposure is indicative
of an overall trend toward increased oversight of Chinese (and
possibly other LDC) production processes and products. The
possibility of tariff imposition, product recalls, and corporate
reputation costs due to negative publicity increases the costs of
environmentally damaging production and reduces the incentive for
firms to seek out pollution havens. Similarly, these processes
increase the long-term benefits associated with transparent firm
environmental regulations throughout the commodity chain and
environmentally sustainable production practices and product
standards relative to the short-term savings associated with lax
environmental regulation.
David Vogel argues that the level of economic dependence on
regulated markets is directly associated with the export of
environmental regulatory and product standards to firms in less-
regulated economies.46 Dubbed the California Effect, this argument
refers to the role of regulated political jurisdictions in fostering a race
to the top among firms with respect to product standards enshrined
in governmental regulation. In contrast to the Delaware Effect, which
assumes that more stringent regulatory product standards represent
a source of competitive disadvantage, the California Effect actually
offers a competitive advantage for firms that self-regulate toward
higher standards because it is easier for them to meet the regulatory
standards in all markets. Although this argument applies primarily
to product standards, we expect that increased international
visibility of producers in LDCs, fostered by international product Page
Many of the claims made above about the importance of firm self-
regulation and the impact of developed-world regulatory stringency
and consumer preferences also apply to firms that invest for local
market access. First, firms must weigh the financial benefits of
excessive environmental pollution against the costs of damaging
domestic relations among host-country consumers. The increasing
number of corporate watchdog NGOs and environmental activists in
China and elsewhere in the developing world are enhancing the
power of developing-world consumers vis-à-vis multinational
corporations. As foreign firms are especially susceptible to
accusations of poor corporate practices from domestic host-country
competitors, they must be as rigorous as possible in mandating strict
corporate environmental production practices. The resulting
increases in corporate accountability reduce the financial
attractiveness of pollution-haven-seeking behavior. This is especially
relevant in growing economies such as China, where homegrown
companies can play off nationalistic sympathies to create competitive
advantage.
Second, many MNCs that invest in less-developed economies such
as China also have extensive operations in highly regulated
developed markets. This implies accountability to consumers in
these markets, as well as those in the host market. The omnipresent
specter of global media demands that firms cannot easily get away
with claims of environmental sustainability in one market while
degrading another. Although the extent to which media coverage
impacts firm decisions is a function of media freedom in a particular
economy, the Chinese Page 26 → government is increasingly allowing
media and NGO corporate watchdogs to assist them in monitoring
corporate activity.48
Along the same lines, it has also been argued that firms operating in
LDCs, regardless of environmental regulatory stringency, tend to
have lower pollution control costs than those operating in developed
nations because the labor and materials used for pollution
abatement cost less.75 In particular, heavy polluters tend to have
lower per unit pollution costs because pollution abatement is subject
to economies of scale.76 This suggests that the financial incentive for
pollution-haven-seeking behavior might be minimal to all but the
heaviest polluters. Moreover, the use of environmental regulatory
stringency as an explanation for international capital flows is
inherently endogenous. As income increases with trade and FDI
inflows, so too should environmental regulation, making pollution
havens a transient phenomenon.77 These dynamics indicate that
even in the absence of strong provincial official attention to the
effects of regulation on investment decisions, regulatory disparities
do not induce investment shifts to pollution havens and thus do not
motivate RTB behavior.
AIR POLLUTION
Coal and cement are two key factors contributing to such high (and
increasing) CO2 emissions. China is awash in cheap, accessible coal.
China builds two or three new coal-fired power plants per week, and
has for quite some time. The low-cost design of these plants means
that they are less efficient and emit more CO2. Moreover, to the
extent that these plants are meant to last for somewhere between
forty and seventy-five years, it seems highly unlikely that China will
be able to eliminate or substantially reduce their numbers in the near
future.7 Cement production has also increased drastically in recent
decades as the rush toward modernization has increased the demand
for infrastructural development. Consequently, China now accounts
for half of all global cement production, and a fifth of China's total
CO2 emissions can be traced to the cement industry.
Unfortunately, CO2, SO2, and other greenhouse gases are not the
only airborne challenges faced by China. The rapid expansion of the
Gobi desert, fueled by overcultivation and deforestation, is also a
tremendous problem. The Page 40 → yellow dust of the Gobi regularly
coats Beijing in a thick blanket of filth, forcing citizens to suffer the
summers with doors closed or face the consequences of noxious,
dusty air. Indifferent to international borders, dense clouds of
particulate matter from the Gobi combined with various other
pollutants have been spotted by American satellites as they leave
China, cross over Seoul and the Pacific Ocean, and finally hit the
United States' western shores.9 Such occurrences are not
uncommon. Dust particles regularly bind with industrial pollutants
such as arsenic, cadmium, and lead produced from China's industrial
boom, forming huge clouds that blow into surrounding areas,
shrouding cities like Seoul in a debilitating yellow cloud of toxic
smog.10
WATER POLLUTION
Putrid water threatens many Chinese cities and towns. With China's
already inadequate water resources and rapidly deteriorating water
quality, this is a challenge with no easy solution. The country
supports a fifth of the world population with access to only 7 percent
of the global water supply, a total that is being diminished by
waterborne pollution. Some 90 percent of Chinese cities suffer from
some degree of water contamination from industrial, municipal, and
agricultural runoff. Damage reports are conflicting, but roughly 78
percent of the rivers and 75 percent of the lakes are polluted and
incapable of being used as drinking water. More than one hundred
major Chinese cities face severe water shortages, or will very soon. It
is estimated that the country has an average annual shortfall of 30
billion cubic meters (m3) in water requirements for irrigation, and a
shortfall of 6 billion cubic meters for urban and industrial water
requirements.11
Page 41 →
Page 42 →
SOLID WASTE
Environmental protection bureaus at provincial level and below are under the direct
leadership of local governments, who are in charge of our personnel changes and
funding.... Eat one's hay, walk his way. It is hard for a local environmental protection
bureau to work independently and monitor the government.35
Page 47 →
The multiple authorities that bureaucratic entities must
accommodate result in considerable interagency rivalry and
competition. This system also produces gridlock and impasse in
policy implementation.36 The dependence of local EPBs on local
governments means that horizontal (kuai) authorities often prevail
over vertical (tiao) authorities. Overlapping bureaucratic authorities
mean that interests in favor of stringent regulations are not always
given first priority. Instead, competing bureaucratic interests are
frequently able to insert themselves in the policy process,
undermining the power and authority of local environmental
protection agencies.
While the tasks of the EPBs are by no means trivial, the fragmented
nature of China's political system places considerable burdens on
their functions. Local finance bureaus' budgetary control of EPBs
means that local interests are frequently able to affect policy
implementation and circumvent uniform compliance throughout the
nation. In this context, the incentive structure of local governments
has played an important role in shaping China's environmental
policy outcomes.
Page 48 →
Government officials' attitudes toward the environment are
influenced by the “environmental Kuznets curve” (EKC) hypothesis,
which posits a curvilinear relationship between economic growth and
environmental protection.39 Because economic growth is assumed to
exert a positive effect on the environment after a certain income
threshold is achieved, many have considered economic development
to be a means of fostering better environmental protection at the
expense of oversight.40 In addition, the public good nature of
environmental protection contributes to local authorities' tendency
to free ride on others' contributions in environmental cleanup.
Several other laws issued during this period also illustrate the
government's growing awareness of the potential negative
environmental impact of foreign investment. The Chinese
government passed the Law of the People's Republic of China on
Foreign Capital Enterprises in 1986 and the Detailed Rules and
Regulations for Implementing Foreign Capital Enterprise Law in
1990. The latter dealt Page 57 → more specifically with the
environmental behavior of foreign firms. An important breakthrough
of this legislation was that it specifically stated that foreign
investment projects with the potential to “produce environmental
pollution” should not be approved. While this law fell short of
defining what exactly constituted an environmentally polluting
project, it does illustrate the growing importance of environmental
protection among state officials and the need to strengthen the
regulatory framework governing foreign investment impact.62
Finally, the Criminal Law of the PRC, passed in 1997, for the first
time declared several environmental acts to be illegal, including the
import of hazardous or regular waste for treatment. The Criminal
Law also specified the penalty for both government and
nongovernment entities that violate the law or fail to live up to their
obligations.68
CONCLUSION
PROVINCIAL-LEVEL ANALYSES
Page 64 → Page 65 →
CHAPTER 4
Pollution Havens and Racing to the Bottom: A
Provincial-Level Analysis
DATA
Page 68 →
DEPENDENT VARIABLE
Our key dependent variable (fdi/GDP) is the actual FDI inflow into
each of the Chinese provinces in each of the years examined. We
normalize FDI inflows by provincial GDP to account for the
possibility that larger provinces are likely to attract a greater amount
of FDI. Although it may be argued that provincial FDI stock is a more
adequate measure of FDI location decisions than FDI flow, we
contend that this is not necessarily the case for this analysis. While a
stock variable does indeed allow for the estimation of regulatory
stringency on FDI accumulation and establishment, this chapter
seeks only to gauge the effects of regulatory stringency at the point of
investment location Page 69 → decision. Further, variations in capital
mobility across industries limit investment re-location in some
industries much more than others. Some industries are simply much
better equipped to respond to a changing regulatory environment
than others. For these reasons we argue that flow variables are better
equipped to capture the effects of regulatory stringency on
investment decisions than stock variables are.
KEY INDEPENDENT VARIABLE
CONTROL VARIABLES
We control for other factors that may affect FDI inflows based on
previous empirical studies of inflow determinants:
Page 71 →
GDP per capita. Since one of the major motivations for FDI is to
seek new sophisticated markets, scholars argue for a positive
correlation between development and FDI attraction.8 For example,
Wang and Swain find that while interest rate and exchange rate are
negatively associated with FDI flows in China's manufacturing
sector, GDP and GDP growth rate positively affect inflows.9 Other
empirical studies yield similar supportive evidence.10 To account for
the effects of economic development on FDI location decisions, we
include the natural logarithm of annual provincial GDP per capita.
LIMITATIONS
Page 75 →
RESULTS
Page 76 →
Regarding the other independent variables, our alternative
measures of infrastructure (Railway and Highway) consistently
demonstrate positive relationships with the dependent variables, and
the relationships are statistically significant across model
specifications. This is in line with the theoretical expectation that
FDI is attracted to provinces with better infrastructure. Variables
representing labor quality (Schools and Graduates) are negatively
associated with the independent variable, and the relationships are
highly significant across model specifications. This lends support to
the argument that FDI is more likely to be attracted to areas where
the educational quality and educational attainment are lower in
order to save on labor costs.
Finally, we did not find GDP per capita or GDP growth rate to
affect provincial FDI inflows in any way. While these variables are
negatively signed in all model specifications, they are also generally
insignificant.
Page 77 →
Page 78 →
ROBUSTNESS CHECKS
In order to increase confidence in our findings, we divided the
country into eastern, central, and western regions and ran the
statistical analysis described in the previous section for each of these
regions.23 Results from this test corroborate the findings reported
above. Our levy variables are positively associated with FDI inflows
in most model specifications and are occasionally statistically
significant. These results provide support to our hypotheses,
indicating that foreign investors are not necessarily attracted to areas
with lax environmental protection and enforcement.
We also ran all models controlling for provincial fixed and random
effects. In this set of tests, the levy variables are positively signed in
some of models and are occasionally significant. They are
insignificant in models where they demonstrate a negative sign, and
do not alter our central findings.
Page 81 →
Page 82 →
Page 83 →
DEPENDENT VARIABLES
Page 85 →
KEY INDEPENDENT VARIABLES
Page 87 →
Data on FDI is based on actual FDI inflows into each of the Chinese
provinces. Since it is possible that provinces that offer better
environmental protection are also more likely to attract FDI inflows,
we include a lagged FDI variable in our analysis. Lagged variables
enable us to gauge the effects of FDI and trade from the previous
year on environmental outcomes in the following year. The fdi,
openness, impgdp, and expgdp variables are all lagged by one year.
CONTROL VARIABLES
GDP per capita. GDP per capita taps the impact of economic
development on environmental protection. The environmental
Kuznets curve (EKC) argument posits that the rise in environmental
pollution in developing countries should be accompanied by an
initial increase in pollution levels, followed by a decline at some
economic threshold.32 From this perspective, the development of
pollution abatement or environmentally friendly technologies,
increases in demand for more stringent environmental policies, and
a shrinking manufacturing sector facilitated by economic
development combine to improve environmental protection. We
include a lagged measure of annual provincial GDP per capita.
All of the above variables are also lagged by one year to mitigate
potential endogeneity problems. We employ the same method for
analyzing the pollution-haven hypothesis to assess the race-to-the-
bottom hypothesis.
RESULTS
Page 89 →
ROBUSTNESS CHECKS
Page 94 →
Finally, to ensure that the results reported in this chapter are not
distorted by provinces with disproportionately large shares of
China's total trade and investment, we experimented running the
models dropping Beijing, Shanghai, and Guangdong one at a time
from the sample. Once again, this procedure did not alter our central
finding as indicators of trade openness and FDI inflow consistently
demonstrate a negative relationship with pollution levels, and the
results are robust across model specifications.
DISCUSSION
LIMITATIONS
Our analysis focuses primarily on the pollution emission
determinants. While our results are supported by robustness tests,
our analysis does not deal with other aspects of environmental
governance such as governmental policy-making, environmental
enforcement capacity, and the effects of corruption on local
environmental protection bureaus. Nor are we able to provide a full
answer to the question as to whether our results apply to different
forms of environmental degradation such as deforestation. In
addition, this study associates environmental Page 95 → protection in
a particular region with the amount of foreign direct investment
received. Due to data limitations, we do not control for the potential
for environmental degradation in one province to stem from foreign
investment in another province. Future studies could extend this
analysis to further analyze the link between globalization and
environmental governance in China.
CONCLUSION
The above empirical results are largely at odds with the pollution-
haven and race-to-the-bottom hypotheses. Our evidence suggests
that the pollution-haven hypothesis does not apply to the case of
China. Rather than (re)directing investment flows toward pollution
havens, environmental regulatory stringency does not appear to have
a noticeable effect on investment decisions. In some cases, MNCs
actually seem to favor investing in provinces with higher standards.
Whether or not a rigorous regulatory environment actually attracts
investment is the subject of another study. However, our results lend
substantial support to the hypothesis that the institutional and social
pressures for self-regulation outweigh the financial benefits
correlated with pollution-haven investment. These pressures are
generated from an array of sources, including external pressure from
consumers, potential investors, and corporate customers, and
internal pressure from shareholders. In addition, environmental
technology developed in response to higher standards in regulated
markets can be exported to subsidiaries in host countries. This
increases operational efficiency and heightens competitive pressure
on host-country firms, and it diminishes the need for pollution-
haven-seeking behavior.
PRODUCT STANDARDS
PRODUCTION PROCESSES
Firms have an incentive to regulate their export products to meet
governmental regulatory requirements in developed markets in
order to maintain unimpeded market access abroad. However,
export-oriented firms in less regulated jurisdictions also have
competitive incentive to regulate their process and production
methods (PPM) to accommodate the public (and corporate) will of
developed export markets. Specifically, we are referring to firms that
supply directly to developed markets, supply to multinationals that
sell in developed markets, and/or act as corporate subsidiaries in
less-regulated economies. Because adverse environmental conditions
in Page 100 → developing countries caused by excessive industrial
pollution are coming under heightened scrutiny from consumer and
environmental NGOs and corporate watchdog groups in the
developed world, MNCs with extensive suppliers and subsidiary
operations in developing countries have a strong incentive to elevate
PPM standards throughout the supply chain.
Page 101 →
ISO 14001
In our empirical analysis, we use the ISO 14001 adoption rate of the
export destination country and FDI source country, normalized by
GDP, as a proxy for domestic environmental regulatory standards.
The ISO 14001 is a series of environmental management standards
created by the International Standards Organization. Because it is a
voluntary program, firm adoption may signal the importance of
corporate environmental responsibility to consumers, consequently
making it an ideal proxy.
STATISTICAL ANALYSIS
Page 105 →
This allows us to test our hypothesis regarding the bilateral FDI
context of a given province. We calculate each province's bilateral
investment context as follows.
Page 106 →
We also include a province's total exports and total FDI to tap the
environmental effect of overall exports and FDI. These variables are
expdep and FDI, and measure the share of a province's total exports
and total FDI inflows divided by GDP.
Because provincial ISO adoption data are available only for the
more recent years (i.e., 2004–7), while country-specific export and
FDI data are only available for earlier years (i.e., 2001–5), we lag all
of the above independent variables by three years in order to make
maximum use of the data.
STATISTICAL METHOD
Page 109 →
ROBUSTNESS CHECKS
Tables 5.2 and 5.3 present our random- and fixed-effect estimation
results, respectively. In all of the model specifications, the variables
representing aggregate FDI and exports at the provincial level hold
up well. With a couple of exceptions, expgdp and FDI have the
expected negative sign with the emission variables, and the
relationships are statistically significant in most model
specifications. Importantly, there is some evidence that export
destinations matter as the weighted export variable is negatively
associated with pollution emission variables, and the relationships
are significant in most model specifications. The variable
representing the bilateral FDI context is in the expected direction in
most model specifications, and the relationships are statistically
significant in Models 1B, 2B, and 2D. While the weighted FDI
variable did not achieve statistical significance in the rest of the
models, its sign is in the expected direction. This lends support to
our hypotheses that it matters as to where each province is sending
its exports and from whom it is receiving the foreign investment.
Page 111 →
Page 112 →
DISCUSSIONS
This chapter finds that provinces that send most of their exports to
or receive the bulk of their investment from countries with more
rigorous environmental standards also tend to more actively pursue
voluntary environmental standards certification. This result is
independent of the net effect of aggregate provincial exports or that
of total incoming FDI. It is also consistent with Vogel's California
Effect argument, supporting the view that when developed countries
with Page 113 → stringent environmental standards absorb the bulk of
developing-country exports, free trade can lead to the ratcheting-up
of environmental standards in developing countries. Such findings
lend further support to the argument that foreign direct investment
can encourage the diffusion of organizational practices from the
home country to the host country. To the extent that there is cross-
national variation in home-country practices, this should result in
the divergence of corporate behavior across national borders.
FIRM-LEVEL ANALYSES
Page 116 → Page 117 →
CHAPTER 6
How Do Firms Behave? Survey Evidence from
Business Executives
HYPOTHESES
Page 120 →
Hypothesis 3 (H3): Firms that sell a large proportion of their output to developed-
world multinational customers tend to make more environ mentally responsible
business decisions.
It should be noted that hypotheses 2 and 3 focus on the overall
effects of developed-country economic interactions on firm
environmental practices. They do not test the impact of specific
export destinations or specific foreign investment source countries.
As the evidence from chapter 5 suggests, Chinese provinces are likely
to alter their level of environmental performance based on their level
of integration with developed markets. If those results are valid, then
we would expect this dynamic to be reflected in our survey of
business executives as well. In this section we focus on the
environmental impact of exporting to or supplying to corporate
customers from specific developed countries and regions (such as
Japan, Europe, the United States, Canada, Australia, or New
Zealand) on firm environmental behavior. We focus on these
countries and regions in part because they are the leaders in areas of
environmental self-regulatory certification mechanisms such as ISO
14001. For example, according to worldwide statistical data on ISO
14001 adoption collected by corporate risk management, Japan,
Australia, Canada, and the United States ranked fourth, seventh,
ninth, and twelfth, respectively, in the per capita number of ISO
14001 adoptions as of the end of 2006.8 Major European countries
also show up as leaders of ISO 14001 certification: Sweden ranks
first, Spain second, and Switzerland third, in the world for number of
ISO certifications, while Italy, the United Kingdom, Germany, and
France rank fifth, eighth, tenth and eleventh, respectively.9 In
addition, there is evidence that developed-world firms have strong
concerns about bad publicity following negative environmental audit
reports.10 Consequently, we expect that firms that either export to or
supply to firms from Japan, Europe, the United States, Canada,
Australia, or New Zealand should engage in more rigorous
environmental practices.
Hypothesis 4 (H4): Chinese firms that export a large proportion of their output to
Japan, Europe, the United States/Canada, and Australia/New Zealand tend to
engage in superior environmental practices relative to other firms.
Page 121 →
Hypothesis 5 (H5): Chinese firms that sell a large proportion of their output to
multinational customers from Japan, Europe, the United States/Canada, and
Australia/New Zealand tend to engage in superior environmental practices relative to
other firms.
RESEARCH DESIGN
Our survey design enables us to control for many factors that might
affect environmental attitudes and performance. Specifically, we
apply sample selection criteria to ensure that our sample
accommodates variation in ownership (i.e., multinational or not), the
industry-level pollution intensity, and level of developed-country
exports or multinational customer supply contracts.
MEASURES
We develop measures of both our dependent and independent
variables. While most of these measures are original, particularly
those of the dependent variables, those that capture the basic firm
characteristics (such as multinational customers, exports to
developed countries, and firm size) are adopted from previous
surveys.11
DEPENDENT VARIABLES
Page 124 →
INDEPENDENT VARIABLES
RESULTS
HYPOTHESIS 1
Similarly, when asked to rate the extent to which they agree with
the statement “The government should invest more in environmental
protection even if it impedes economic growth,” all of the FIE
executives answered “agree” or Page 126 → “strongly agree” to this
question, compared to the 81 percent of executives of WDOFs who
answered positively to this question (see table 6.3). The Pearson
correlation between Multinational ownership and the respondents'
answers to this statement is 0.341, which is again significant at the
p< 0.05 level for a 2 tailed test.
TABLE 6.1. Variable Measurement
ISO 14001 adoption: “Has your company registered for ISO 14001?”
(1) yes; (2) no; (3) not sure what ISO 14001 is
Answers (2) and (3) were recoded as “0”; answer (1) was coded as “1.”
Independent Variables
(1) state-owned enterprise; (2) collective enterprise; (3) private ownership; (4) joint
venture; (5) wholly foreign-owned enterprise
We recoded this variable into a dichotomous variable whereby answers (1)–(3) were
recoded as “0” and answers (4) and (5) were recoded as “1.”
Page 127 →
(1) none; (2) 1–25%; (3) 26–50%; (4) 51–75%; (5) 76–100%
“Of the products you sell in the domestic market, what percentage is sold to joint
ventures or wholly foreign-owned firms?”
(1) none; (2) 1–25%; (3) 26–50%; (4) 51–75%; (5) 76–100%
We took the sum of a respondent's answers to items (1)–(4) to create the Exports to
developed countries variable.
Figure 6.2 plots the mean, one standard deviation above, and one
standard deviation below the mean for each group of respondents.
Similar to the pattern observed in figure 6.1, executives of FIEs
consistently had higher mean scores on this question than WDOFs.
The one standard deviation above the mean and one standard
deviation below the mean are also higher for FIEs than for WDOFs.
Figure 6.3 compares the mean score, one standard deviation above
the mean, and one standard deviation below the mean for WDOFs
and FIEs regarding this question. Once again, figure 6.3 illustrates
that FIEs generally consider environmental protection to be equally,
if not more important than economic development, as they have
consistently achieved higher scores than executives of WDOFs.
HYPOTHESES 2–3
Page 132 →
Page 133 →
HYPOTHESES 4–5
We also found some support for the hypotheses that exporting to or
supplying to multinational customers from Japan or Europe exerts a
positive effect on a firm's environmental performance. Table 6.6
presents the correlation statistics between Exports to Europe,
Exports to Japan, Exports to U.S./Canada, Exports to
Australia/New Zealand, Supply to Europe, Supply to Japan, Supply
to U.S./Canada, Supply to Australia/New Zealand and each of the
measures of firm environmental management performance.
Page 136 →
Figure 6.6 further provides a visual presentation of the relationship
between a company's exports to Japan and its perception of the
environmental impact of these practices. In figure 6.6, as the share of
a company's exports to Japan goes up, the mean and the standard
deviations of its executive's perception of the environmental impact
of such practices increase as well. This dynamic indicates a positive
view of the environmental spillovers of exporting to the Japanese
market. Furthermore, the Pearson correlation between Exports to
Japan and the summary index of executive attitudes toward the
environmental impact of such practices is 0.344, and the
relationship is statistically significant at the p < 0.05 level for a 2-
tailed test. These results suggest that companies that export a large
proportion of their products to Japan tend to have positive views of
the environmental impact of such practices.
We followed a similar procedure in analyzing business executives'
attitudes toward the impact of supplying to corporate customers
from Japan on the company's environmental performance.
Respondents were first asked to specify the share of the products the
company supplies to Japanese firms operating in China in the
company's total sales volume. Then in two separate questions, we
asked the respondents to share their views regarding whether the
more stringent product and process standards of the home
country(s) of the MNC customer(s) have any impact on the
environmental performance of their company Page 137 → and of other
companies in their industry. We again combined the respondents'
answers to these two questions to create a summary index. Table 6.8
shows the respondents' mean response scores to these two questions.
Once again, the greater the share of a company's supply to Japanese
firms in the respondent's total sales volume, the higher its mean
response score on the summary index. This indicates that the greater
the extent of a company's supply to Japanese firms, the more likely it
is to view the more stringent product and process standards of Japan
as exerting a positive effect on the company's overall environmental
practices.
Figure 6.7 plots the relationship between Supply to Japan and the
executives' perception of its environmental impact on the firm. The
result again reveals that companies that supply a large percentage of
their products to corporate customers from Japan tend to have a
more positive view of the influence of product and process standards
in their clients' home country on their own environmental
performance. As the share of the company's supply to Japan in the
company's total sales volume goes up, the mean and standard
deviations generally also follow an upward trend. The Pearson
correlation between the extent of a company's supply to Japan and
its executive's attitudes toward the influence of the supply
relationship on the company's environmental performance is .430,
which is significant at the p < 0.01 level for a 2-tailed test. Overall,
these results suggest that business executives consider the
environmental standards of their corporate customers to positively
influence their company's own environmental performance. The
results also indicate that the environmental standards in a
company's main importing country(s) or its main corporate
customer(s) do exert a ratcheting-up effect on its own environmental
standards and procedures as reflected in executives' belief systems.
These results lend additional support to the findings presented in
chapter 5.
Page 138 →
SECTORAL COMPARISON
LIMITATIONS
DISCUSSIONS
In the next section, we address the rationale for our case selection
in greater detail and issues related to data and methodology. The
chapter then turns to an overview of the Chinese pulp and paper
industry, followed by detailed analysis of our industry case. We also
discuss alternative explanations for the subtle alterations in APP's
behavior, noting that each of these explanations alone does not
account for the observed behavior. The chapter concludes by relating
our findings to the key contentions of this project and discussing
their theoretical and policy implications.
Page 145 →
CASE SELECTION, DATA SOURCES, AND METHODOLOGY
Case studies are useful in the context of this book because they allow
us to reinforce our prior findings with evidence derived from the firm
level. Our case study draws on the process-tracing procedure, which
places the process leading to the observed policy outcomes at the
center of the investigation, to support our key theoretical
contentions. By focusing on the motivations, behavior, and responses
of the key actors involved in the process, our research strategy allows
us to test our central theoretical propositions to see if the FDI
country of origin and the export destination(s) of the firm do indeed
affect its environmental policies and procedures through the posited
causal mechanisms.
Our case study focuses on the Chinese pulp and paper industry. Our
primary corporate case is APP, a subsidiary of the Sinar Mas
conglomerate formerly of Indonesia and now based in Singapore.
APP is currently one of the world's largest paper manufacturers with
extensive operations in China and across the globe. In choosing our
individual corporate case study, we sought a foreign invested firm
that not only provides an empirical backdrop to our process
illustration but was also representative of the industry at large.
Rather than stacking the deck with an MNC that is an exemplar of
corporate environmental responsibility and had never been
identified with a scandalous or negative exploit, we sought a firm
that is truly representative of the paper industry. While it had at one
point been faulted with its destructive forestry practices, APP has
demonstrated signs of improved conduct due to concerns about loss
of overseas market shares brought about by negative NGO campaign
and media exposure. Such subtle yet perceptible changes in APP's
behavior toward greater environmental responsibility lend support
to both legs of our argument.
Second, in order to account for the possibility that firms may be less
than forthcoming with disclosures of unscrupulous environmental
behavior or that firm emphasis on environmental sustainability was
mere window dressing, we conducted interviews with the Forest
Stewardship Council, an industry-specific international
environmental nongovernmental organization operating in China.
The organization provides supervision of the corporate actions of
APP and similar firms, and lends additional validation to the data
collected from APP. We also conducted interviews with researchers
in the Research Institute of Forestry Policy & Information at the
Chinese Academy of Forestry and a professional private pulp and
paper industry market research firm, Brian Stafford and Associates,
both of which analyze the Chinese pulp and paper industry and
specific pulp and paper firms. By pursuing a variety of sources we
attempt to check both the statements provided by the mills
themselves and the environmental NGOs monitoring them, as the
two have been known to be quite antagonistic toward one another.
The Chinese government closed many of the old mills in the past
decade to mitigate the environmental impact of paper production
and to increase industry productivity and efficiency.6 The pulp and
paper industry in China today has been diversified to include mills
owned by the Chinese government, some of which have been
privatized, and mills established by private entrepreneurs, notably
foreign-invested mills such as APP, April Fine Paper China,
International Paper, Stora Enso, UPM Kymenne, and Norske Skog.
During the restructuring process the Chinese government offered
incentives to both domestic and foreign investors to provide capital
to accommodate restructuring, ensure adequate fiber supply growth,
and sustain booming domestic demand.
Page 148 →
APP and its parent firm, Sinar Mas, have long been charged with
extensive Indonesian deforestation.11 Sinar Mas's sustainable fiber
supply practices first ascended to the media spotlight in 2000. In
November 2000, a study of the Indonesian pulp and paper industry
released by the Center for International Forestry Research (CIFOR)
pointed to APP's problematic fiber sourcing practices, charging that
it would likely clear large new areas of natural forest to meet its raw
material demands because of the low probability of securing
sustainable fiber supplies from existing plantations.12 In addition,
throughout the summer of 2001, the British daily The Guardian
published a series of articles detailing the destructive impact of pulp
and paper manufacturing on Indonesia's forests,13 leading one of
Britain's major paper suppliers, Robert Horne Group, to temporarily
suspend purchases from APP in August 2001. Interestingly, such
media and NGO attacks against APP took place at a time when the
company was also confronted with major financial troubles. The
combination of these problems caused share prices to tumble,
leading APP to default on its debt in March and to be delisted from
the New York Stock Exchange in July. APP and Sinar Mas Group's
financial weaknesses alerted financial analysts, paper buyers, and
other concerned parties to its unsustainable wood supply strategy
and enabled environmental activists to drive home the point that
tremendous pressure on forest resources exerted by Indonesia's pulp
and paper industries entailed considerable environmental as well as
financial risks.
Page 153 →
As one of the world's largest, vertically integrated pulp and paper companies, APP-
China recognizes that sustainable development is the foundation for long-term business
success. In addition to this commitment, the concerns of stakeholders and customers
from around the world are also an important factor in implementing [the company's]
environmental management strategies.23
Page 158 →
ENVIRONMENTAL TECHNOLOGY
Technology provides the only way to achieve sustainable development of the forestry
industry in China. . . . In terms of our processing facilities, we are committed to using
state-of-the-art technology to improve efficiency and to decrease environmental impact.
We are strongly committed to the philosophy of continuous improvement and the use
of best available technologies with the long-term goal of producing carbon neutral
paper. One of our main motivations in developing and using new technology is to
increase production and improve energy efficiency and fuel mix.34
Page 160 →
APP abides by all local Chinese environmental regulations, and all other laws and
regulations. In many cases this does not impact our environmental practices because
our policies already require a degree of environmental consideration at or above the
regulations. However, in some cases regulations have created the need to adjust our
practices.43
Page 164 →
Page 165 →
ALTERNATIVE EXPLANATIONS
Given that APP has received substantial credit and loan forgiveness
from the Chinese government, it is conceivable that such financial
assistance could have been used as a carrot to stop APP from illegally
logging natural forests. However, we argue that the risk exposure for
Chinese banks, along with the fact that APP accounted for 29 percent
of China's paper industry (valued at US$24 billion a year in 2004),55
reduced the leverage of the Chinese government vis-à-vis Page 167 →
The APP case detailed above lends support to our argument about
both the influence of the environmental standards in the home
country of investment and that of world market linkages. On the one
hand, APP-China has received a considerable amount of negative
publicity regarding illegal logging in southern Page 168 → China.57
Such negative media exposure is consistent with much of the
criticism that APP's parent company, the Indonesia-based Sinar Mas
Group, has received from environmental NGOs and activists over the
years. It is also consistent with the country-of-origin argument
regarding the environmental impact of FDI, as APP's questionable
forestry practices in southern China can be explained by Sinar Mas
Group's long-standing forestry practices in Indonesia, lax regulation
on the part of Chinese officials, and APP's financial troubles that
pushed it to meet production goals in the first few years of the
operation's establishment.
Importantly, our case study suggests that while negative media and
NGO campaigns no doubt played a major role in precipitating such a
change in behavior by exposing APP's illegal practices to public
scrutiny, concern about bad reputation leading to potential loss of
sales and shares in export markets was equally critical in APP's
recent initiatives to strengthen environmental management and to
improve its reputation as an environmentally responsible company.
THEORETICAL IMPLICATIONS
The findings of this project have implications both for the literature
dealing with the overall impact of globalization on the environment
and for studies of China's participation in the international economy.
This section discusses the theoretical implications of our analyses.
IMPLICATIONS FOR THE LITERATURE ON THE IMPACT OF GLOBALIZATION
ON THE ENVIRONMENT
Page 173 →
POLICY IMPLICATIONS
Our research has shown that market mechanisms should not bear
the brunt of the blame for the depressing condition of the Chinese
environment. In many respects China's trade and investment
liberalization and economic integration have contributed to stronger
environmental governance. In light of the Chinese experience, it is
necessary to ask what, if anything, international actors with a stake
in sustainable development can do to allow developing countries to
enjoy the benefits of FDI while preventing and minimizing the
associated negative environmental externalities.
CAVEATS
This project has highlighted the positive role of trade and foreign
investment in improving environmental quality in China. For that
reason, it has left out the following question: if trade and foreign
direct investment do indeed have the ratcheting-up effect as posited,
then why is China's environment in such a deplorable condition?
There are two potentially useful avenues of tackling this question:
one is to consider the potential for the scale effect of globalization to
overwhelm the technique effect, and the other is the possibility that
the root causes of China's environmental woes are linked to domestic
politics.
Since mid-2008, the global economy has been mired in the worst
economic downturn since the Great Depression, prompting
questions about the impact of the global economic recession on the
commitment of both Chinese and Western firms to sound
environmental standards. At first blush, it appears that the belt-
tightening necessitated by the global economic crisis could have
created incentives for corporations to look for ways to cut back on
expenditures, thus generating downward pressure on the
environment. However, a closer analysis would suggest that the
picture might be far more complicated, as companies that have been
able to successfully weather the financial crisis storm seem to be
holding up their commitment to responsible corporate behavior.
Walmart, for example, has been able to maintain its market share
and has continued to exert pressure on its suppliers to meet
environmental and labor standards. For example, in July 2009, in
the heart of the economic recession, Walmart released its
“Sustainability Index” initiative to map the sustainability of its
products worldwide. This is a bold step for any corporation, but
especially one as large as Walmart in the midst of an economic
recovery.27 Instead of generating downward pressure on the
environment across the board, the crisis may have led those who
were able to come out of it relatively unscathed to continue to abide
by stricter standards while leading those struggling to cope with the
economic downturn to scale back their environmental commitments.
The unfolding of the crisis in the future could help us reach more
definitive conclusions on this issue.
Page 182 →
CONCLUSION
If trade and FDI are not to blame for China's environmental woes,
then it Page 183 → may be necessary to strengthen domestic
environmental governance in China by expanding the participation
of public and private actors in the environmental policy process. For
example, our case study of the APP indicates that the media and
environmental NGOs are increasingly serving as corporate
watchdogs by exerting pressure on highly polluting firms to modify
their behavior. Organizations such as the Institute of Public and
Environmental Affairs directed by the Chinese environmentalist Jun
Ma have developed the first public database of Chinese water
pollution. These data have exposed to public scrutiny companies that
have excessively polluted China's waterways.28 While there are limits
to the extent of civil society participation in China's political system,
the gradual expansion of such public participation should generate
incremental changes in the long term.
Notes
CHAPTER 1
17. Ibid.
18. Petra Christmann and Glen Taylor, “Globalization and the
Environment: Determinants of Firm Self-Regulation in China,”
Journal of International Business Studies 32, no. 3 (2001):
439–58.
24. See, for example, Economy, The River Runs Black; Day,
China's Environment and the Challenge of Sustainable
Development.
25. For studies that address the divergences in provincial
behavior following economic reform, see, for example, Dali L.
Yang, Beyond Beijing: Liberalization and the Regions in China
(London: Routledge, 1997); David S. G. Goodman and Gerald
Segal, eds., China Deconstructs: Politics, Trade, and
Regionalism (London: Routledge, 1994); Yehua Dennis Wei,
Regional Development in China: States, Globalization, and
Inequality (London: Routledge, 2000); Shaoguang Wang and
Angang Hu, The Political Economy of Uneven Development:
The Case of China (Armonk, NY: M. E. Sharpe, 1999).
24. For studies that examine the RTB dynamics at the state level
in the context of American politics, see, for example, Kirsten H.
Engel, “State Environmental Standard- Page 189 → Setting: Is
There a ‘Race' and Is It ‘To the Bottom'?” Hastings Law Journal
48 (1997): 271–398; Matthew Potoski, “Clean Air Federalism:
Do States Race to the Bottom?” Public Administration Review
61, no. 3 (2001): 335–42; Neal D. Woods, “Interstate
Competition and Environmental Regulation: A Test of the Race
to the Bottom Thesis,” Social Science Quarterly 87, no. 1
(2006): 174–89.
31. Daniel L. Millimet and John A. List, “The Case of the Missing
Pollution Haven Hypothesis,” Journal of Regulatory Economics
26, no. 3 (2004): 239–63.
34. Antweiler et al., “Is Free Trade Good for the Environment?”
41. For this view, see Alireza Naghavi, “The Role of Green Tariffs
in Environmental Harmonization,” Center for Economic
Research Working Paper Series, WP 04/07, 2004.
52. Michael E. Porter and Claas Van der Linde, “Green and
Competitive: Ending the Stalemate,” Harvard Business Review
73, no. 5 (1995): 120–51.
CHAPTER 3
14. Ibid.
19. Ibid.
26. Ibid.
57. For example, Ross cites the adoption of the ISO 14001 and
ISO 9000 series by Chinese firms as evidence of the influence of
international private actors on environmental standards setting
in China. Ibid.
61. Ibid.
CHAPTER 4
21. All of the models are estimated using the XTPCSE command
in STATA 9.
22. Page 199 → Nathaniel Beck and Jonathan N. Katz, “What to
Do (and Not to Do) with Time-Series Cross-Section Data,”
American Political Science Review 89, no. 3 (1995): 634–47.
23. Test results for each of these regions are available from the
authors.
29. It should be noted that prior research (i.e., Xing and Kolstad,
“Do Lax Environmental Regulations Attract Foreign
Investment?”) has demonstrated the use of pollution emissions
as an effective proxy for environmental protection.
30. These results are available from the authors upon request.
39. These results are available from the authors upon request.
45. Also see Antweiler et al., “Is Free Trade Good for the
Environment?”
CHAPTER 5
8. Purba Rau and Diane Holt, “Do Green Supply Chains Lead to
Competitiveness Page 201 → and Economic Performance?”
International Journal of Operations and Production
Management 25, no. 9 (2005): 898–916.
12. Ibid., 1.
13. See table 6.1 for the rating scale for these questions.
14. The rating scale for this question is the same as the one used
for the Multinational customer variable. See table 6.1 for a
detailed description.
19. Ibid.
20. Justin Grant and Ritsuko Ando, “Staples Cuts Ties with APP
on Environment Worry,” Reuters, February 8, 2008.
http://www.reuters.com/article/rbssConsumerGoodsAndRetail
News/idUSN0844455620080208 (accessed November 17,
2008).
35. Ibid.
41. Ibid.
43. Ibid.
44. Ibid.
45. Ibid.
55. Samuel Shen, “Fund's Bid for China Pulp Firm Collapses,”
International Herald Tribune, July 31, 2006, 12.
56. Christine Hill, “Asia Pulp & Paper's Fall from Grace,” Global
Finance, December 1, 1998. Available at
http://findarticles.com/p/articles/mi_qa3715/is_199812/ai_n8
819044/ (accessed July 22, 2009).
57. See, for example, “Asia Pulp & Paper Increases Investment in
China Despite Illegal Logging Charges,” Ethical Corporation
Archive, November 19, 2004,
http://www.ethicalcorp.com/content.asp?ContentID=3220
(accessed March 9, 2009); “Greenpeace Clashes with Asian Pulp
and Paper over Another China Project,” AFP, March 2005.
Available at
http://findarticles.com/p/articles/mi_kmafp/is_200503/ai_n1
4743052 (accessed March 9, 2009).
CHAPTER 8
14. Jim Yardley, “China Says Rich Countries Should Take Lead
on Global Warming,” New York Times, February 7, 2007, A9.
15. Michael A. Santoro, Profits and Principles: Global
Capitalism and Human Rights in China (Ithaca: Cornell
University Press, 2000).
Adam, David. “China's Carbon Emissions Soaring Past the U.S.” The
Guardian, June 13, 2008.
http://www.guardian.co.uk/environment/2008/jun/13/climatec
hange.carbonemissions (accessed October 29, 2010).
Aitken, Brian J., and Ann E. Harrison. “Do Domestic Firms Benefit
from Direct Foreign Investment? Evidence from Venezuela.”
American Economic Review 89, no. 3 (1999): 605–18.
Page 212 →
Brown, Paul, and John Aglionby. “British Money Fuels Cycle of Debt
and Destruction.” The Guardian, June 26, 2001, 9.
Carter, Neil T., and Arthur P. J. Mol. “China and the Environment:
Domestic and Transnational Dynamics of a Future Hegemon.”
Environmental Politics 15, no. 2 (2006): 330–44.
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Dean, Judith M., Mary E. Lovely, and Hua Wang. “Are Foreign
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Evaluating the Evidence from China.” Journal of Development
Economics 90, no. 1 (2009): 1–13.
Page 216 →
Grant, Justin, and Ritsuko Ando. “Staples Cuts Ties with APP on
Environment Worry.” Page 217 → Reuters, February 8, 2008.
http://www.reuters.com/article/rbssConsumerGoodsAndRetailN
ews/idUSN0844455620080208 (accessed November 17, 2008).
“Greenpeace Clashes with Asian Pulp and Paper over Another China
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http://findarticles.com/p/articles/mi_kmafp/is_200503/ai_n14
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He, Dequan, and Christopher Barr. “China's Pulp and Paper Sector:
An Analysis of Supply-Demand and Medium Term Projections.”
International Forestry Review 6, no. 3–4 (2004): 254–66.
Hill, Christine. “Asia Pulp & Paper's Fall from Grace.” Global
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http://findarticles.com/p/articles/mi_qa3715/is_199812/ai_n88
19044/ (accessed July 22, 2009).
Ho, Peter. “Greening without Conflict? Environmentalism, NGOs,
and Civil Society in China.” Development and Change 32, no. 5
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Page 218 →
Page 219 →
King, Andrew A., and J. Myles Shaver. “Are Aliens Green? Assessing
Foreign Establishments' Environmental Conduct in the U.S.”
Strategic Management Journal 22, no. 11 (2001): 1069–85.
Lang, Chris. “Pulp Mill Watch Fact Sheet Country Profiles: China.”
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http://www.pulpmillwatch.org/media/pdf/China_profile.pdf
(accessed January 27, 2009).
Lee, Ching Kwan. “Engendering the Worlds of Labor: Women
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Millimet, Daniel L., and John A. List. “The Case of the Missing
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Ministry of Environmental Protection. Environmental Impact
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Porter, Michael E., and Claas Van der Linde. “Green and
Competitive: Ending the Stalemate.” Harvard Business Review
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Page 223 →
Prakash, Aseem, and Matthew Potoski. “Investing Up: FDI and the
Cross-Country Diffusion of ISO 14001 Management Systems.”
International Studies Quarterly 51, no. 3 (2007): 723–44.
Rau, Purba, and Diane Holt. “Do Green Supply Chains Lead to
Competitiveness and Economic Performance?” International
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Roett, Riordan, and Guadalupe Paz, eds. China's Expansion into the
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Page 226 →
Page 227 →
Winston, Morton. “NGO Strategies for Promoting Corporate Social
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Page 228 →
Index
acid rain, 3, 39
agricultural pollution, 2, 40
air pollution: data, 38–39; FDI/temporality and, 50, 53, 54; gas
emission reduction and, 163, 164, 164; global warming and, 3, 43,
178; greenhouse gases emissions and, 2, 38–40, 44, 139, 178;
respiratory health and, 2, 39; trade patterns/temporality and, 50,
53, 54; yellow dust from deforestation and, 39–40. See also
industrial pollution
Anderson, C. Leigh, 17
APP (Asia Pulp & Paper) analysis: APP described, 149; case selection
rationale and, 144–45; consumer pressure importance and, 167,
168; credit/loan forgiveness from government and, 166–67; data
sources for, 145–46; environmental audits and assessments and,
161–63, 162; environmental management strategies and, 155–57,
206n32; environmental practices changes and, 153–55, 160–61,
167, 168; environmental production processes and, 158–59; ESD
Sinosphere partnership with, 160, 162; export impacts and, 153–
55; FDI home country/global market linkages, 167–69; forest
practices/deforestation and, 149–50; gas emission reduction and,
163, 164, 164; global environmental standards and, 161–62; global
markets and, 144–45, 153, 167–69; Gold East Paper subsidiary of,
152–55, 157, 159, 161–65, 164; Gold Huasheng Paper subsidiary
of, 162, 162–63; government regulations and, 160–61, 165–66,
206nn51–52; Hainan forest/deforestation practices and, 149–51;
ISO 14001 certification for subsidiaries of, 161–62, 162; local
environmental standards and, 149, 156, 159, 160–61, 163;
methodology and, 10–11, 145–46; NGO environmental activism
and, 165, 168, 183; Ningbo Asia Pulp & Paper subsidiary of, 162,
162–63; Ningbo Zhonghua Paper Co., Ltd., subsidiary of, 159, 161,
162, 164–65; overview of, 13, 143–44, 167–69; “Paper Contract
with China” and, 156–57, 206n32; pulp and paper industry
overview and, 146–49, 204n2, 204n6; Sinar Mas Group parent
firm for, 149, 150–51, 167, 168, 204n11; solid waste reduction and,
165; wastepaper recycling and, 164–65; Yunnan
forest/deforestation practices and, 149–52. See also firm behavior
analysis
Beck, Nathaniel, 74
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Birdsall, Nancy, 17
case studies, 10, 144–45, 175, 182. See also specific case studies
chemical oxygen demand (COD), 41, 147, 157, 160, 164, 206n32,
207n52
Chen, Chien-Hsun, 72, 74, 107
China Statistical Yearbook, 10, 51, 52, 53, 66, 67–72, 80, 84, 85, 86,
88, 92, 106, 141, 197n5
Christmann, Petra, 28
COD (chemical oxygen demand), 41, 147, 157, 160, 164, 206n32,
207n52
consumer pressure and firm accountability, 25, 28, 31, 167, 168
Dasgupta, Susmita, 35
entrepreneurship, 179
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FDI (foreign direct investment): air pollution and, 50, 53, 54; control
variables/impact in RTB provincial-level analysis and, 87–88;
democratization impact of, 179; divergence/convergence in
corporate practices and, 34, 101, 178–79, 182; economic impact of,
1, 32, 178–79; entrepreneurship impact of, 179; environmental
pollution linkages with, 1, 2, 4; environmental practices
improvement pressure and, 169; environmental technology
information transfer due to, 2, 30–31, 66, 102–3; firm behavior
analysis, and impact of, 178–79; firm self-regulation and, 27;
future research and, 178–80; global market linkages with home
country of, 167–69; home country environmental regulations and,
1, 34, 96, 101–2, 167; home country expectations effects on
provincial environments and, 101–4; human rights impact of,
179–80; independent variables/impact on RTB provincial-level
analysis and, 87; MNC subsidiaries, and effects of, 101–2; primary
pollutant levies data, 197nn5–6; research projects and, 170, 178–
80, 207n1; social impact of, 178, 179; solid waste
pollution/temporality and, 52, 54; temporality/environmental
pollution relationship and, 50, 51–53, 54, 65; trading up/investing
up provincial-level analysis and, 101–4. See also PH (pollution
haven) provincial-level analysis; RTB (race to the bottom)
provincial-level analysis; trading up/investing up provincial-level
analysis
firm behavior: accountability and, 25, 28, 174, 182; actors affecting,
4; assumptions about, 4; divergence/convergence in corporate
practices and, 28, 34, 99, 100–101, 178–79, 182; environmental
deregulation demands and, 34; environment effects on, 4; FDI
impacts on, 178–79; global market influences on, 3; MNC
subsidiaries, and impact of, 102, 167; trading-up/investing-up
provincial-level analysis and, 33–34. See also firm behavior
analysis; firm self-regulation; hypotheses, for firm behavior
analysis
Fujita, Masahisa, 73
health issues, 2, 3, 39
Hettige, Hemamala, 35
Hu, Dapeng, 73
hypothesis 1 (H1): FIE and, 119, 125, 129, 140; overview of, 119, 141;
results, 125, 128, 129, 130, 131; WDOF and, 119
hypothesis 2 (H2): overview of, 120, 141; results, 129–31, 132, 133
hypothesis 3 (H3): overview of, 120, 141; results, 129–31, 132, 133
hypothesis 4 (H4): overview of, 120, 141; results, 133–39, 134, 135,
136, 137
hypothesis 5 (H5): overview of, 121, 141; results, 133–39, 134, 135,
136, 137
Ivarsson, Inge, 30
Kollman, Kelly, 35
Levinson, Arki, 18
Li, Xiaojian, 30
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Moore, Thomas, 179
paper and pulp industry. See APP (Asia Pulp & Paper) analysis; pulp
and paper industry
Page 237 →
product environmental standards, 24, 26, 33, 96, 98–99, 100, 200n4
race to the bottom (RTB) critique. See RTB (race to the bottom)
critique
Rainforest Alliance, 42
respiratory health, 2, 39
Ross, Lester, 54
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RTB (race to the bottom) critique: composition effect and, 21, 29;
cost estimates of pollution abatement and, 32; demand effect and,
29–31; empirical analysis of, 2, 21–22; environmental
deregulatory competition critique, 29–31; environmental
protection and, 191n65; environmental regulation as positive and,
31–33; free trade and, 173; overview of, 11, 14, 20–22; provincial
governments and, 28–33; social pressures for environmental
protection, 191n65; trade patterns/environment relationship and,
21
Shen, Junyi, 18
Shimamoto, Kenichi, 17
SOE (state-owned enterprise), 42, 73, 75, 76, 87, 90, 109
Spatareanu, Mariana, 17
state-owned enterprise (SOE), 42, 73, 75, 76, 87, 90, 109
Sun, Qian, 73
Taylor, Glen, 28
Tong, Wilson, 73
trade patterns: environmental pollution/temporality relationship
and, 50, 51, 51–53, 52, 53, 54, 65; environmental protection, and
investment linkages with, 7–8; environmental regulations, and
liberalization's effects on, 1; environment relationship with, 21;
increase analysis effects on environmental pollution and, 2; solid
waste pollution/temporality and, 50, 52, 54
Vogel, David: California Effect and, 2, 4, 24, 26, 33, 99, 112–13; on
environmental regulations/economics relationship, 200n4;
trading-up argument and, 6–7, 98, 171
Wang, Hua, 18
World Trade Organization (WTO), 18, 19–20, 21, 23, 95, 99, 141,
189n26
Worldwatch Institute, 38
WTO (World Trade Organization), 18, 19–20, 21, 23, 95, 99, 141,
189n26
Yeung, Yue-man, 30
Yu, Qiao, 73