Environmental policy impacts of trade with China and the moderating effect of governance

Over the past decade, China has become one of the largest trading partners to countries of Latin America and Sub-Saharan Africa. A major concern is environmental degradation: much of this trade is composed of pollution-intensive raw materials and Chinese traders do not promote the adoption of stringent environmental policies among trade partners, as the United States and the European Union do. The probable outcome for China's trade partners is a race to the bottom, whereby trade-based competitive pressures lead governments to systematically weaken environmental regulations. However, this outcome may be moderated by good governance, as willing and able governments react to heightened pollution-intensive trade with China by strengthening policies. This study considers whether sound governing institutions offset the harmful effects of trade with China on environmental policy outcomes, using a dataset covering 58 Latin American and Sub-Saharan African countries over 10 years (2001–2010). Tests focus on the moderating effects of two facets of good governance: representativeness and bureaucratic capacity. The results demonstrate that trade with China does generate a race to the bottom in the environmental policies of partner countries. This effect is moderated by bureaucratic capacity, but not by representativeness.