Real economic benefits and environmental costs accounting of China-US trade

Abstract

A critical reason for China-United States trade friction is that China has a huge trade balance, especially the trade balance of goods. However, this huge trade balance is based on the results of official statistics and does not reflect the real economic benefits and environmental costs embodied in China-US trade, where both refer to trade in value-added and embodied CO₂ emission costs, respectively. This paper calculates the trade in value-added and carbon emission transfer between China and the United States based on the World Input-Output Database. Results demonstrate that: (1) Gross trade statistics seriously overestimate China's benefits in China-US trade. The China-US trade surplus, based on gross trade statistics, is 20% higher than when based on trade in value-added accounting. (2) In China-US bilateral trade, China mainly adopts the trade model of importing intermediate products and exporting final products，whereas the United States mainly adopts the trade model of importing final products and exporting intermediate products. China's exports to the United States contain many of value-added in Korea, Taiwan, and Japan. (3) From 2000 through 2014, China maintained a large surplus of CO₂ emissions exports to the United States, and China paid a huge environmental cost in its trade with the United States. (4) In China-US trade, China's environmental costs per unit value-added is 3.02 times that of the United States.

Keywords: China-US trade; Embodied CO(2) emissions; Environmental inequality; Multiregional input–output; Trade in value-added.