Abstract
Abstract This paper aims to analyse the effect of trade facilitation on sectoral trade flows. We use data from the World Bank's Doing Business Database on the fees associated with completing the procedures to export or import goods in a country, on the number of documents needed and on the required time to complete all the administrative procedures to import and export. An augmented gravity equation is estimated for 13 exporters and 167 importers using a number of estimation techniques, namely OLS, PPML and the Harvey model. A common result is that trade flows increase by lowering transport costs and the number of days required to trade. The outcome supports multilateral initiatives, as that in the WTO, which encourages countries to assess their trade facilitation needs and priorities and to improve them. The measures adopted will not only benefit the country that improves trade facilitation, but also it's trading partners.
Highlights
The aim of this paper is to shed some light on the relationship between trade facilitation and trade flows, and to evaluate the potential benefits of trade facilitation in terms of boosting exports
The results indicate that trade flows increase by lowering the number of days and documents required to trade to a higher extent in trade of differentiated goods, and that improvements in service infrastructure foster international trade flows in all sectors
A gravity model extended with trade facilitation variables was estimated and three different estimation techniques, namely OLS, PPML, and the Harvey model, were used
Summary
The aim of this paper is to shed some light on the relationship between trade facilitation and trade flows, and to evaluate the potential benefits of trade facilitation in terms of boosting exports. This issue is of growing interest in the trade policy debate since trade facilitation has been included in the Doha Development Agenda. The mandate for the World Trade Organization (WTO) negotiations on trade facilitation was adopted in July 2004. This paper shows that any trade facilitation efforts made by developing countries to accomplish the WTO mandate will have a positive effect on trade volumes, and will help to improve economic development and living standards. While other trade costs (tariffs and non-tariff barriers) have fallen as a result of WTO trade negotiations and regional integration agreements, transaction costs related to cross-border trade procedures have become relatively more important
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