Greening China: The Benefits of Trade and Foreign Direct Investment by Ka Zeng & Joshua Eastin

Author:Ka Zeng & Joshua Eastin
Language: eng
Format: epub
Publisher: The University of Michigan Press
Published: 2018-05-15T00:00:00+00:00

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CHAPTER 7

Asia Pulp & Paper: Local Standards, World Markets, and Environmental Protection

Through analyses of Chinese provincial-level data and survey data, the previous chapters suggest that economic integration with developed-world markets encourages companies to adopt more sustainable business practices. By ensuring further development and innovation of environmental abatement technology and by facilitating the transfer of corporate norms of environmental governance, integration with the world market has helped to mitigate some of the worst environmental effects of rapid industrialization.

This chapter further highlights these effects through a case study of Asia Pulp & Paper (APP), a major manufacturer of pulp and paper formerly based in Indonesia, now in Singapore. Not only does the company have a reputation for illegal domestic environmental destruction, it has also attracted considerable criticism from both environmental nongovernmental organizations and the media for illegal logging in southern China. Thus this case helps to illustrate how the environmental practices of the parent firm influence those in its overseas subsidiaries. However, our interviews with APP executives and independent researchers of the Chinese pulp and paper industry indicate that when access to important developed-country markets became threatened by negative media exposure and criticism by nongovernmental organizations, APP-China gradually modified its behavior and introduced more environmentally friendly policies, procedures, and technologies in its China operations. By illustrating how the transmission belt effect of its trade relationships produced these unexpected outcomes, this case study helps to strengthen our central theoretical argument Page 144 → about how trade and, more specifically, developed-country exports can ratchet up the environmental standards and operating procedures in developing countries.

Before proceeding, a few words about our case selection are in order. Instead of illustrating our argument with a company with a sound reputation for environmental protection, we choose to focus on APP, which has long been alleged to employ destructive forestry practices in Indonesia and elsewhere in the world. The country-of-origin argument presented in earlier chapters should lead us to expect that the Indonesia-based APP should be even less environmentally responsible than a Chinese firm. However, the evidence presented below suggests that APP has demonstrated subtle changes in its environmental behavior in China. We conjecture, in line with our previous arguments, that the behavioral change results from an attempt to maintain continued developed-world export market access. APP represents a hard case where one should find the least support for our argument, and yet we found confirming evidence for our contentions. Compared to a case study based on analyses of a “good” corporate citizen, our strategy allows us to provide stronger evidence about how linkages with the international market can compel changes in a company's environmental practices.

The causal mechanisms illustrated in this chapter highlight the importance of several key dimensions of economic integration on the Chinese environment at the firm level, demonstrating in particular the importance of country of origin and export destinations to those interactions. Drawing on firm-level evidence from the paper and pulp industry, an industry considered to be highly polluting and energy and waste intensive, this

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