Empirical Analysis of Trade Liberalization and FDI on Environmental Quality in OIC Member Countries

Abstract

In the last half-century, rapid growth has occurred in global production. The barriers to foreign investment and trade are being reduced and better interconnectedness is being established between markets of different countries (Carril-Caccia & Pavlova, 2018; Gormsen, 2012). Due to trade liberalization, foreign direct investments (FDI) and the quality of the environment are regarded as strengths of an economy. Moreover, they have an important role as they can enhance the fund supply for investing in the country (Abdouli & Hammami, 2017). The economies can be unified between countries having positive relations resulting in better opportunities (Herzer, 2012; NGS, 2022; Wetzel et al., 2021). A vast range of options for investment will provide new ways of profit for investors and thus intense promotional strategies are procured by many industries to attract foreign direct investments (Loewen dahl, 2018; Wells & Want, 1993). Additionally, it encourages the transfer of technologies and employment opportunities for the host country resulting in economic growth (Belluomini, 2014). However, the impact of these trades on the quality of the environment has faced a lot of criticism and has caused concern, especially for countries with deplorable environmental quality (Zhu et al., 2016). Various sectors of the country now consume an increased amount of energy causing CO2 emissions to surge and thus the susceptibility of our ecosystem is in question (International Energy Agency, 2022; Ritchie et al., 2020)