The Impact of Various Trade Arrangements on Malaysia’s Bilateral Trade Costs

doi:10.17576/jem-2018-5202-6

Abstract

Highlights

According to Anderson and Wincoop (2004), trade costs are large, accounted for approximately 170 per cent of ad valorem tax equivalent of a rich country, and comprised of four costs namely; local distribution costs, transport costs, policy barriers and border related costs.In the case of Malaysia, trade costs related to policy barriers, which consisted of tariffs are almost negligible, with an exception of non-tariff barriers
It is surprising that Bilateral Free Trade Arrangement (BFTA) surpassed Regional Trade Arrangement (RTA) in reducing trade costs, and this implies that the size of the trading zone or regional trade arrangement does not match a bilateral arrangement in terms of cost reduction
This study aims to estimate the impact of trade arrangements on trade costs for Malaysia and her 116 trading partners

Summary

Introduction

According to Anderson and Wincoop (2004), trade costs are large, accounted for approximately 170 per cent of ad valorem tax equivalent of a rich country, and comprised of four costs namely; local distribution costs, transport costs, policy barriers and border related costs. In the case of Malaysia, trade costs related to policy barriers, which consisted of tariffs are almost negligible, with an exception of non-tariff barriers. The improved network has reduced the role of intermediaries in the distribution front, a reduced cost to buyers. Border related costs tend to vary between countries due to differences in its economic and social environment. Countries which more friendly to investors, exporters and importers would likely result in lesser border related costs. Along with non-tariff barriers, trade costs incurred by border related costs is huge, Malaysia’s participation in various trade agreements is expected to reduce trade costs

Objectives

Methods

Findings

Discussion

Conclusion