Import demand for United States environmental goods and services

Abstract

Import demand for U.S. environmental goods and services was made a function of economic (GDP, overall index of economic development, exchange rate, debt service), structural (level of water pollution, index of air pollution), and political (index of democracy, degree of economic liberty) factors in a country. The results show that the overall level of economic development, the level of democratization, and degree of economic liberty were significant factors influencing the import demand for U.S. environmental goods and services. High debt service levels have a negative impact on import demand. Since multilateral funding went to water resource improvements in developing countries, the study found the index of safe water in a country to be a highly significant factor in explaining import demand for U.S. environmental goods and services. The study concludes that U.S. foreign trade policies in the post-cold war era must focus on expanding democratization and economic liberties in developing countries as a means of expanding U.S. trade. Furthermore, the policy must support countries in their effort to get out of debt. The U.S. must support the broader macroeconomic adjustments, especially exchange rate re-alignments undertaken by developing countries.