Who Loses? Who Wins?

I had an interesting conversation today with a fellow academic about the U.S./China dynamic. It went like this:

Friend: We (the U.S.) are regulating ourselves into poverty with all of these environmental restrictions
Me: Really? How?
Friend: First we can't use DDT, we lose all of our citrus to South America, then we have water quality regulations and we lose all of our manufacturing to China. Next, we'll regulate greenhouse gases and then we REALLY won't be able to compete. We've regulated ourselves out of manufacturing anything. All we can do is borrow money and buy stuff from China. China has all the money and we have all the debt!
Me: So pollution carries no cost?
Friend: What do you mean?
Me: Well, pollution certainly can't be a positive thing. I find it rather undesirable.
Friend: Like the dollar cost? I don't know...
Me: No, not the dollar cost. That would be nearly impossible to calculate. I'm talking about the real cost, the human cost. Have you seen pictures of China? Have you seen how bad the air is? The water? That doesn't just go away. That's going to be with them for decades. People are going to get sick. People are going to die of cancer. Millions of people. We could default on our debt tomorrow and it wouldn't have a material impact on your life. After all, it's just paper. But if we default, the Chinese won't be able to give us all that pollution back. They're stuck with it. So it's a little bit of a pompous, maybe even nihilistic, view but the reality is that if the Chinese are willing to pollute their country into oblivion while we kick back, enjoy clean air, and buy the fruit of their labour with their money.... that's a pretty sweet deal! I don't really see how we lose!