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Under the Haze: Chinese Transboundary Pollution in South East Asia

By Frederick Hemans | January 10, 2018



Pollutants, such as carbon dioxide (CO2), Sulfur Dioxide (SO2), Ozone, PM 2.5, and water contamination do not respect national boundaries or Special Economic Zones, but instead drift around the region and around the globe, affecting both the rich and poor in these regions. Air pollutants originating in southern China drift southward and eastward, moving across the Pacific Ocean but also down mainly into the Southeast Asian nations of Vietnam, Laos, Cambodia, Malaysia, and Singapore.


While regional juggernaut China has done much recently to address environmental pollution (mostly after coming to grips with its negative impact on GDP growth), response from ASEAN to address Chinese pollution has been weak and diffuse. Much of this lack of will is due to the large differences in the size, scale, and development level of different ASEAN nations: Consensus or cooperation is difficult to achieve when many of the developing nations have incentive to work bilaterally with Chinese development groups and private firms outside of the ASEAN framework. Additionally, they autocratic nature of many of the governance systems of nations such as Malaysia and Singapore make them less inclined to provide public goods such as a clean environment.


Trade Negotiations and “Environmentalism, Chinese Style”


China has pursued two main avenues of trade agreements with Southeast Asia: broad sweeping free-trade agreements as well as smaller bilateral ones. They are the main force behind the Regional Comprehensive Economic Partnership (RCEP), featuring ASEAN members as well as Australia, New Zealand, Japan, and Taiwan. Additionally, they have established many smaller bilateral agreements with individual nations. They have been pursuing a deliberate strategy of starting local and small, then gradually expanding outward into their region and across the Pacific.


The rationale behind this is simple: two-pronged approach allows them to use their size as leverage in bilateral talks with small nations, and thus expand their total sphere of trade influence by making huge sweeping free trade deals such as the RCEP. The economic leaders in Beijing feel that Southeast Asian nations are less likely to be obstructionist on issues like Chinese air pollution in large-scale regional FTA negotiations if they fear losing some of the benefits they have established in bilateral trade agreements with China.


This is one key component in explaining why there has been a lack of political will from ASEAN to address this issue. Because of the difference in overall development level as well as total factor endowment by the various ASEAN nations, there are divisions and factions among the nation who benefit more from Chinese foreign direct investment (FDI) in basic infrastructure projects, such as Laos or Cambodia, and those who have a higher baseline of development and industrial capacity, such as Singapore and Malaysia.


Trade between the People's Republic of China and ASEAN nations has increased by more than a magnitude of 10 since the year 2000, to more that US $300 Billion dollars annually, driven by the increasing interdependence of the global value chain of private firms.

However, there are very few formal agreements between Southeast Asian nations as well as with China that address transboundary environmental issues, and what has been codified has usually revolved around technology sharing and infrastructure. Indeed, many of these plans and organizations are piecemeal and fragmented, and fail to gain much traction or influence in trade negotiations.


ASEAN: A Lack of Political Will for Serious Environmental Considerations


If trade considerations are one key reason why ASEAN leaders see greater benefit in the status quo rather than in pushing for greater air quality standards in negotiations with regional juggernaut China, the other key pieces of the puzzle comes directly from the governance models of the Southeast Asian nations themselves.


Among the nations most affected by Chinese transboundary air pollution (Vietnam, Laos, Cambodia, Malaysia, and Singapore), all feature some form of a single-party authoritarian regime, such as the Vietnamese Communist Party or UMNO dominance in Malaysia. The key issue is also that, on the margin, authoritarian regimes may have less incentive to provide certain public goods, and that the distribution of these public goods is skewed towards the benefit of the small group of elites. While nations such as Singapore and Malaysia have built vibrant economies under effective single party control, these regimes are usually inclined to provide certain public goods that are in line with the specific goals of the elites, such as a strong economy, while ignoring other public goods such as clean environment. This is because increasing environmental regulation may lead to a loss of economic productivity in certain sectors, sectors that authoritarian leaders and their family members may be direct stakeholders in.


The political disconnect between authoritarian regimes leads to an uneven distribution of action on air pollution. Leaders of influential nations in Southeast Asia with more developed economies are weary of sacrificing GDP growth on pollution mitigation programs that may have a high marginal cost. Additionally, influential citizens of higher socio-economic status have access to avoidance and defensive health behaviors that reduce the ill effects of air pollution for themselves, including greater access to air filtration systems. Without a modification of the payoffs and costs of air pollution damage, there is likely to be little serious action.


A common model of the relationship of development and environmental damage is that once a country or region reaches a certain level of development, there is an increasing demand for environmental regulation pollution mitigation, an environmental Kuznets curve. However, generally citizens and leadership in many Southeast Asian nations have in aggregate a much higher social utility of consumption of the goods provided from economic growth and industrialization that the associated social costs. What we see is that even at middle and higher income per capita levels of nations like Malaysia and Singapore that there is a much lower marginal willingness to pay for a cleaner environment that would likely be estimated. Other regional economies that are still developing are still lower on the Kuznets curve to have a high demand for pollution regulation. South East Asia seems to break the model of demand for pollution regulation and mitigation.


As we have outlined, there are two key reasons why there is a lack of political will to address this widespread public health of transboundary air pollution in South East Asia. One is the interdependence and reliance on trade with the huge economy to the north, making it politically complex for national governments to address in binding language of bilateral or regional free trade agreements. But this alone does not fully explain the issue. The other key issue is the nature of the governance structures of many Southeast Asian nations.

Governments with single party dominance and smaller groups of elites who have larger economic and political influence are less likely to feel the political pressure for environmental regulation, and can avoid the personal adverse health effects of air pollutants. Without a meaningful change in the payoff structure for those in power, this pattern is likely to continue for the foreseeable future.


Frederick Hemans is a second year MIA student at UC San Diego School of Global Policy and Strategy, and is the Director of Content at JIPS. His area of study is on international environmental policy and global common resources.

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