Quantitative Assessment of the Benefits of Trade Facilitation

Abstract

Trade transaction costs (TTCs) related to border procedures vary depending on the efficiency and integrity of interacting businesses and administrations, the characteristics or kind of goods, and the size and type of businesses. Total costs may be seen as being composed of directly incurred costs, such as expenses relating to supplying information and documents to the related authority, and indirectly incurred costs, such as those arising from procedural delays. Empirical studies suggest that directly and indirectly incurred TTCs each amount to 1-15 per cent of traded goods’ value. The model-based analysis of the economic impacts of trade facilitation carried out in this study differs from earlier research by taking several salient features of import and export procedures into account. In particular, the differing characteristics of direct and indirect TTCs are represented, and country-specific differences in trade facilitation potential are reflected according to empirical information on border waiting times and survey-based evidence on the quality of border processes. In addition, the higher TTCs for agro-food products and small and medium-sized enterprises are incorporated into the analysis. The analysis does not evaluate the economic and trade impact of specific trade facilitation measures or instruments, such as those that might result from a possible future WTO agreement on trade facilitation. Instead, the aim of the assessment is to better represent empirical characteristics of the border process in model-based analysis and to identify those features that crucially affect the results and that, therefore, deserve to be further explored in future analysis. Several scenarios of hypothetical, multilateral trade facilitation efforts are evaluated, focusing on the comparison of scenarios rather than the overall welfare gains that might result from trade facilitation.