Trade Facilitation and the EU-ACP Economic Partnership Agreements

Abstract

The aim of the paper is to assess the potential benefits from trade facilitation in terms of increased trade flows both on average and specifically for the six regional groupings of ACP countries negotiating Economic Partnership Agreements (EPAs) with the EU. We use data from the World Bank’s Doing Business Database on the time required to export or import as indicators of cross-border transaction costs. A gravity model on two-way bilateral trade between 22 EU countries and 106 developing countries is estimated using a sample selection approach. We find that time delays both on the part of the exporter and the importer on average significantly decrease trade flows. We also find that this relationship is not linear: an extra day of waiting has smaller marginal effects if the time requirements are already high. On average, lowering border delays in the exporting country with one day from the sample mean would yield an export increasing effect of about 1 percent, while the same reduction in the importing country would give an import increase of about 0.5 percent. More specifically, we also find that countries negotiating in the EPA groups for SADC, West Africa, Eastern and Southern Africa (ESA), and the Caribbean have negative and significant effects from export transaction costs, as do EU and non-ACP developing countries. The effects for the SADC, West Africa and ESA groups are the largest. Countries in the Pacific, SADC, West Africa and the EU have significantly negative effects from import transaction costs, with the effects being largest for the two former groups. The results are generally robust to a number of alternative estimation methods such as Poisson estimation, IV estimation and the sample selection approach suggested by Helpman, Melitz and Rubinstein (2007).