THE IMPACT OF ENVIRONMENTAL STANDARDS AND REQUIREMENTS ON TRADE LIBERALIZATION: EMPIRICAL EVIDENCE FROM OECD COUNTRIES

Abstract

Objective: This study aims to measure the impact of environmental standards and requirements on trade liberalization in the OECD countries from 1990 to 2021. Theoretical Framework: The study utilizes economic and environmental theories to examine the relationship between regulatory policies and trade liberalization, utilizing key frameworks such as environmental economics, the Kuznets curve, and global trade models to analyze this interaction. Method: We used unconditional quantile regression methods to examine the relationship between environmental regulations and trade liberalization. The model includes variables such as environmental policy stringency, environmental taxes, carbon emissions, and renewable energy production. Results and Discussion: The study concluded that stringent environmental policies increased freedom of trade at different levels of trade liberalization. The results also confirm that environmental tax policies are particularly effective in promoting trade liberalization in countries with weak or low levels of trade liberalization. The results further suggest that in the case of countries where trade liberalization is weak or below average, carbon emissions are associated with increased trade liberalization. Furthermore, renewable energies contribute to deepening levels of trade liberalization in countries characterized by higher-than-average levels of trade liberalization. Research Implications: This study provides insights into how environmental policies can be strategically used to promote trade liberalization. The findings may influence policy-making in areas such as environmental taxation, energy transition, and international trade. Originality/Value: This study explores the impact of environmental regulations on trade liberalization, highlighting how different policies can either promote or hinder trade freedom, especially in economies at different stages of liberalization.