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Home»Articles»Trade Liberalization and its Environmental Impact in India: An Empirical Analysis

Trade Liberalization and its Environmental Impact in India: An Empirical Analysis

Author : Ranjan Aneja and Ummed Singh
Volume 7 No.1 January-June 2018 pp 111-119

Abstract

The debate on the impact of trade on environment is pertinent considering the increasing volume of trade among world nations and the changes in environmental quality. In India, this increase was higher because of the gradual lifting of the quantitative restrictions and reduction in tariffs after trade liberalization in 1991. The pollution haven effect occurs when trade liberalization, coupled with lax environmental regulations results in increasing economic activities in pollution intensive industries. Using industry level data for the period 1998-2008, for fifty eight manufacturing industries in India, this paper looks at output and export trends and attempts to examine, whether trade liberalization is associated with a shift in production and exportation towards pollution intensive goods industries (pollution haven effect). Manufacturing output has been significantly higher from the water pollution intensive sectors compared to the air and toxic pollution intensive sectors. This evidence provides some support for concerns that there is significant contribution in production of manufacturing industries from dirty industries. The results of the study suggest that while trade liberalization measures have been pursued to promote economic growth in India but they have led to some potentially adverse environmental consequences.

Keywords

Trade liberalization, Pollution haven effect, Quantitative restrictions, Central pollution control board, NAFTA

Full Text:

References

[1] Antweiler, Werner, Copeland, Brian R., & M. Scott Taylor. 2001. “Is Free Trade Good for the Environment?” NBER, Working Paper No. 6707.
[2] Azhar, Usman, Samina Khalil & MohsinHasnain Ahmed (2006). Environmental Effects of Trade Liberalization: A Case Study of Pakistan, Balochistan University of Information Technology and Management Sciences, Quetta
[3] Beghin, J. & Potier, M., (1997). Effects of Trade Liberalization on the Environment in the Manufacturing Sector, World Econ. 20(4).
[4] Dasgupta, Susmita, Benoit Laplante, Hua Wang & David Wheeler (2002). Confronting the Environmental Kuznets Curve”, Journal of Economic Perspectives, 16(1).
[5] Dessus, S. & Bussolo, M., (1998). Is there a trade-off between trade liberalization and pollution abatement? A computable general equilibrium assessment applied to Costa Rica. Journal of Policy Modeling, 20(1).
[6] Dinda, S. (2006). Globalization and environment: Can pollution haven hypothesis alone explain the impact of globalization on environment? MPRA Paper, 50590.
[7] Grossman, G. & Krueger, A.B. (1993). Environmental Impacts of a North American Free Trade Agreement. Centre for Economic Research, Discussion Paper 644.
[8] Gupta, Shreekant. (2000). Estimating Benefits and Cost Savings through Market Based Instruments: An Application Using State-Level Data from India. Working Paper.
[9] Hettige, Hemamala, Paul Martin, Manjula Singh, & David Wheeler. The Industrial Pollution Projection System. Policy Research Working Paper #1431, The WorldBank.
[10] Jena, P.R., N. C. Sahu & Rath. B. (2005). Does Trade Liberalisation Create Pollution Haven? An Indian Experience, paper presented at the “International Conferenceon Environment and Development: Developing Countries Perspective. April 7-8, 2005, ITD, SIS, Jawaharlal Nehru University, New Delhi.
[11] Jha, Shreyasi & Rabindran S.G. (2004). Environmental Impact of India‟s Trade Liberalization. paper presented at the “75 years of Development Conference” held at Cornell University, New York, 7-9 May
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[15] Mukhopadhyay, K. and D. Chakraborty (2005). Is liberalization of trade good for the environment? Evidence from India, Asia-Pacific Development Journal. 12(1), 109-136
[16] Mukhopadhyay, Kalkali (2006), “Impact on the Environment of Thailand’s Trade with OECD Countries” Asia-Pacific Trade and Investment Review, 2(1).
[17] Naughton, T, Helen. (2010). Globalization and Emissions in Europe. The European Journal of Comparative Economics, 7(2), 503-519.

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The debate on the impact of trade on environment is pertinent considering the increasing volume of trade among world nations and the changes in environmental quality. In India, this increase was higher because of the gradual lifting of the quantitative restrictions and reduction in tariffs after trade liberalization in 1991. The pollution haven effect occurs when trade liberalization, coupled with lax environmental regulations results in increasing economic activities in pollution intensive industries. Using industry level data for the period 1998-2008, for fifty eight manufacturing industries in India, this paper looks at output and export trends and attempts to examine, whether trade liberalization is associated with a shift in production and exportation towards pollution intensive goods industries (pollution haven effect). Manufacturing output has been significantly higher from the water pollution intensive sectors compared to the air and toxic pollution intensive sectors. This evidence provides some support for concerns that there is significant contribution in production of manufacturing industries from dirty industries. The results of the study suggest that while trade liberalization measures have been pursued to promote economic growth in India but they have led to some potentially adverse environmental consequences.

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Department of Indian Studies, University of Malaya, Malaysia
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Department of History, University of Malaya, Malaysia
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    Editorial Note

    Editorial Dr. Lakshmi Narayanan

    Editor-in-Chief
    Dr. Lakshmi Narayanan
    Department of Social Sciences, College of Arts and Applied Sciences, Dhofar University, Oman
    [email protected]
    Editorial Advisory Board
    Dr. Mashitah Binti Hamidi
    Department of Social Administration and Justice, University of Malaya, Malaysia
    [email protected]
    Dr. Jillian Ooi Lean Sim
    Department of Geography, University of Malaya, Malaysia
    [email protected]
    Dr. Haris Bin Abd Wahab
    Department of Social Administration and Justice, University of Malaya, Malaysia
    [email protected]
    Dr. Mohana Dass Ramasamy
    Department of Indian Studies, University of Malaya, Malaysia
    [email protected]
    Dr. Ma Tin Cho Mar @ Noorjahan Bi Bi
    Department of South East Asian Studies, University of Malaya, Malaysia
    [email protected]
    Dr. Asbah Binti Razali
    Department of Anthropology and Sociology, University of Malaya, Malaysia
    [email protected]
    Dr. Azharudin Bin Mohamed Dali
    Department of History, University of Malaya, Malaysia
    [email protected]
    Dr. Hasmah Binti Zanuddin
    Department of Media Studies, University of Malaya, Malaysia
    [email protected]

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