Linkages Between Trade Facilitation and Governance: Relevance for Post-COVID-19 Trade Strategy

Mamta Kumari,Nalin Bharti

doi:10.1177/0976399620972346

Mamta Kumari, Nalin Bharti

Open Access

https://doi.org/10.1177/0976399620972346

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Journal: Millennial Asia	Publication Date: Jan 18, 2021
Citations: 9	License type: CC BY 4.0

Affiliation: Indian Institute of Technology Patna

Abstract

The devastating effect of COVID-19 on the economy, health and the financial system is well known now. The pandemic has distorted trade as well. In such a situation, trade facilitation (TF) has emerged as an effective tool to mitigate the devastating effect of COVID-19 on trade. Several countries have initiated policy responses to take necessary steps towards TF measures. However, a relevant question arises: Are all these countries prepared for the effective and efficient implementation of the TF measures? This study attempts to answer this question by identifying the major institutional determinants of TF measures (mainly included in the World Trade Organization [WTO] Trade Facilitation Agreement) based on existing theories, such as the ‘theory of institutions’ and the ‘political economy of trade policy’ approach. It utilizes data of many countries for the years 2012, 2015, 2017 and 2019. The findings of this study suggest that the quality of governance has a significant positive impact on all TF measures. Moreover, the study finds that developing and small-sized countries are more responsive to the impact of an institutional factor on their TF performance than developed and large-sized countries. Therefore, it proposes measures to improve TF performance, which is crucial to minimize further disruptions in trade caused by COVID-19.

Highlights

IntroductionIn recent years, eliminating the impediments to the movement of goods across borders (known as trade facilitation [TF]) has emerged as a critical factor in enhancing trade and sustaining economic development
In recent years, eliminating the impediments to the movement of goods across borders has emerged as a critical factor in enhancing trade and sustaining economic development
The World Trade Organization (WTO) Trade Facilitation Agreement (TFA) has been implemented with the aim to make all countries, especially developing and least developed countries (LDCs), eligible to play a proactive role in the world trading arrangement and employ trade as a tool for growth and poverty reduction (WTO, 2015)

Summary

Introduction

In recent years, eliminating the impediments to the movement of goods across borders (known as trade facilitation [TF]) has emerged as a critical factor in enhancing trade and sustaining economic development. The multilateral significance of TF has been recognized with the conclusion of a multilateral Trade Facilitation Agreement (TFA) at the World Trade Organization (WTO) in the year 2017. Global organizations like WTO and the Organisation for Economic Co-operation and Development (OECD) had projected potential gains from implementing the WTO TFA before the COVID-19 crisis. World Trade Report 2015 indicated that TF is expected to add to yearly world export growth by about 2.7 per cent and 0.5 per cent to global GDP growth by 2030 (WTO, 2015). It would boost export and GDP of developing countries and LDCs by 3.5 per cent and 0.9 per cent annually, respectively. Shepherd (2016) found that the implementation of the WTO TFA would help sub-Saharan African countries connect to global value chains. Hillberry and Zhang (2017) validated the significant impact of the OECD TFIs on border agencies’ performance. Fontagne et al (2020) ascertained the impact of OECD TFIs on exports through the extensive and intensive margins and their heterogeneous effect on exporters of different sizes and productivities

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