The impact of reducing trade barriers on enterprises' pollution emissions: Evidence from China

Trade and pollution are important issues for people's well-being. However, less attention has been paid to the study of changes in international trade rules affecting the emission behavior of micro firms. This paper takes the quota restriction of the multi-fiber arrangement (MFA) lifted as an exogenous impact and explores the impact of trade barriers reduction on pollution emissions of textile industries using the difference-in-differences (DID) method. The results show that (1) after the quota restriction of the MFA was lifted, the reduction of trade barriers increased the pollution emissions of the textile industry. The enterprises' SO2 emission intensity with trade barriers reduced increases by 8.1% compared to the industries with trade barriers that have not been reduced. (2) The impact of the trade barrier reduction on enterprises' pollution emissions varies with the type of enterprise ownership, export nature, and enterprise scale. For private enterprises, export enterprises, and large-scale enterprises, the promotion effect of trade barrier reduction on enterprises' pollution emissions is more significant. (3) The mechanism test results show that the increase in SO2 emission intensity is mainly caused by the increase in the market share of enterprises, the deterioration of energy structure, and the increase in pollution output of enterprises. Therefore, it is critical to reduce enterprises' pollution emissions by maintaining a reasonable market share, optimizing energy structures, and increasing investment in pollution treatment equipment. This study reveals that changes in MFA international trade rules have profoundly influenced the production decision-making behavior of companies in exporting countries, producing deep implications for enterprise pollution emission behavior and providing empirical evidence and management guidance for developing countries' development of environmentally friendly trade policies and responses to trade-induced environmental pollution shocks.