The economic literature on the interface between environmental policies and international competitiveness has grown rapidly over the last decade (Dean 1992). A Major focus of this literature has been the assessment of whether differences in countries environmental regulations have affected the production and exports of pollution intensive products and/or whether do some countries strategically manipulate their environmental policies to confer some competitiveness benefits on their domestic industries. Though theoretically these concerns are well confirmed, unfortunately, there is no conclusive answer to either question and it is rather a case by case issue. For example Low and Yeats (1992) have suggested that ?dirty? industries in developed countries have suffered loss of international competitiveness over the last three decades as a result of the relatively high environmental standards in developed world. Whereas, Jaffe et al. (1995) conclude that there is relatively little evidence to support the claim that environmental regulations have adverse effects on competitiveness.
Nonetheless, concerns are growing particularly in developing countries about the possible misuse of environmental measures and standards to discriminate against the penetration of their products into the developed countries markets. These concerns are coupled with growing domestic and international pressures on developing countries to set up measures to protect the environment, which if succeed, may lead to an increase in production costs and reduction in exports particularly from pollution intensive industries. Thus there is an important trade-environment dimension at stake, which warrants further analysis of the issue. Kuwait as a small open economy embarking the road of developing and diversifying its industrial base certainly shares similar concerns and faces similar effects and tradeoffs as other developing countries. The purpose of this study is to shed lights on the possible impacts of domestic and international environmental regulations on Kuwait exports of chemical and petrochemical products.

The rest of the paper is organized as follows: section 2 provides background information on the status of the chemical and petrochemical industry in Kuwait; section 3 presents the domestic and international regulatory regimes affecting the industry; section 4 summarizes the interviews results and sketches the possible regulatory scenarios; section 5 presents methodology and some exploratory results and section 6 concludes.