Trade facilitation and environmental quality: empirical evidence from some selected African countries

Abstract

The growing trend of economic integration and globalization has made the need to harmonize cross-border trade and their associated procedures among trading countries, inevitable. Nonetheless, there is an emerging debate about the environmental consequences of engaging in trade interactions among the policymakers, trade pundits and researchers alike. To this end, this study examines whether Africa’s inefficient trade facilitation procedures hold plausible explanations for her coincidental low incidence of carbon emissions. The empirical evidence is based on both Pooled Ordinary Least Squares (POLS) and Two-Step System Generalized Method of Moments (Sys-GMM) on six components of trade facilitation (costs, documents and time required to import and export) vis-a-vis the environmental measures including carbon emissions (CO2), and nitrous oxides (N2O) on a panel of 48 African countries over the period spanning, 2005–2014. While the choice of the former estimator is chiefly influenced by the need to have a baseline model on the one hand, the choice of the latter is motivated by the need to account for econometric concerns including endogeneity, reverse causality and simultaneity bias, respectively, on the other hand. The main finding from the study reveals a significant negative relationship between trade facilitation and environmental pollution captured. On the policy perspective, determining the threshold levels of trade procedural measures is necessary for achieving effective regulation of inflow of carbon–embodied goods and services into an already environmentally lax continent.