Septiembre, 2015

The Impact of Trade Facilitation on Developing Countries

By Federico Mazzella Septiembre, 2015
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The aim of this article is to disseminate and discuss the study by Moïsé and Sorescu (2013) on the impact of trade facilitation (TF) on developing countries.

The study assesses how various TF measures that are linked to the main policy areas under negotiation at the World Trade Organization (WTO) have an impact on the cost and volume of developing countries’ trade. The objective was to estimate the impact that implementing TF-related reforms and improving border procedures would have on a given country.

Sixteen indicators were constructed based on the Trade Facilitation Agreement (TFA) for 107 developing countries, 96 of which are members of the WTO, based on different databases such as the World Bank’s Doing Business, Logistics Performance Index, etc. Through the use of a gravity model, the study sought to measure the impact of each indicator on trade costs, and incorporated them as explanatory variables.

The most noteworthy results are that the greatest impacts on export and import performance are caused by the availability of trade-related information, the simplification and harmonization of documents, the streamlining of procedures, the use of risk management practices, and process automation. The combined effect of these TF measures implies a reduction of between 13.2% and 14.5% of trade costs for developing countries (with even greater effects on lower-income countries), an effect greater than that for developed countries, which is estimated at 10%. It is interesting to note that the overall effect of the measures is greater than the sum of the individual effects of each one. This reveals the importance of tackling the reforms from an integrated perspective, rather than through isolated individual measures.

The value of the study lies in the fact that it provides a quantitative assessment of the effect that implementing TF-related measures has on trade costs.

 

Bibliography

Moïsé, E. and Sorescu, S. 2013. “Trade Facilitation Indicators: The Potential Impact of Trade Facilitation on Developing Countries’ Trade”. OECD Trade Policy Papers No. 144. OECD Publishing. March.

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