Territorial attractiveness, trade liberalization, and pollution: Evidence from Morocco between 1975 and 2015

Abstract

The impact of trade liberalization on the environment has generated a heated debate recently. With rising concern over environmental quality, an investigation of the consequences of trade openness on the environment has become unavoidable. In this paper, we estimate an input-output structural decomposition analysis model to examine whether Morocco benefited from trade liberalization in terms of CO2 emissions. Particularly, we test whether Morocco can be regarded as a pollution haven before and after joining the World Trade Organization and implementing multiple multilateral and bilateral trade agreements (i.e., during 1975-1995 and 1995-2015). Results provide evidence that Morocco can be characterized as a pollution haven. An increase in trade for Morocco implies extra pollution. CO2 emissions embodied in exports become more important than emissions avoided by imports after trade liberalization, which can be explained partly by lax environmental regulations. Results also revealed that exports is among the most important final demand categories contributing to CO2 emissions growth in the Moroccan economy. France, Singapore, Spain, Italy, UK, the USA, Germany, and the Netherlands are among the top 10 export destinations with the highest emissions embodied in exports. Thus, the possible policy implications that one might draw is that some caution is needed in the future when further liberalizing trade. Trade liberalization has certainly its benefits in terms of economic growth. Nevertheless, the economic growth it produces is far from sustainable. Therefore, attempting to avoid such pollution haven phenomenon through legal and institutional infrastructure improvements has become a necessity. Since pollution is a global problem, cooperation among the various trading partners would assist in the advancement of technological innovation and sustainable growth which would improve environmental quality on a global scale.