Environmental Provisions in Preferential Trade Agreements and Chinese Firms' Domestic Value‐Added Ratio in Exports: Technological Effects or Import Expansion?

ABSTRACT Rising the domestic value‐added ratio (DVAR) in exports is critical for China's pursuit of high‐quality trade development and a new development paradigm. While actively engaging in global environmental governance through environmental provisions in preferential trade agreements (EP‐PTAs), China also faces the challenge of reconciling such commitments with high‐quality trade development. Using matched data from the Trade and Environment Database (TREND), the Chinese Customs Statistics Dataset (CCSD), and the Chinese Annual Survey of Industrial Firms Dataset (CASIFD) (2000–2014), this study examines the impact of EP‐PTAs on Chinese firms' DVAR in exports. We find that EP‐PTAs overall reduce firms' DVAR in exports, primarily through an import expansion effect, with no significant offsetting technology effect. Furthermore, effects vary by provision types. Trade‐liberal EP‐PTAs enhance technology upgrading but also spur import expansion, whereas technology‐related and enforcement‐and‐implementation EP‐PTAs show stronger productivity benefits. EP‐PTAs in different environmental areas also have different effects. Finally, the negative impact is weaker for foreign firms, firms in regions with developed product and factor markets, and those in less pollution‐intensive or upstream industries. These findings inform China's effort to align global environmental engagement with high‐quality domestic trade restructuring.