Trade Costs in Asia and the Pacific: Improved and Sectoral Estimates

There is ample evidence that successful implementation of bilateral or regional trade and economic integration initiatives would have a very significant impact on intraregional trade in Asia and the Pacific. However, little is known about the level of intraregional trade costs in the region and to what extent these costs may have decreased over time. This paper introduces new aggregate and sectoral estimates of bilateral trade costs in Asia and the Pacific available in an updated and extended version of the ESCAP Trade Cost Database (Version 2). The new data suggests that (1) most countries and subregions have made improvements in reducing trade costs; (2) Trade costs among Asian countries still often exceed the costs of trade of Asian countries with developed countries outside the region; and (3) tariff costs accounts for only a small portion of comprehensive trade costs – although tariff cuts account for a large share of overall trade cost reduction over the past decade. At the sectoral level, agricultural trade costs are systematically found to exceed manufacturing trade costs, even when tariff costs are excluded. The fact that agricultural trade costs in many developing countries are twice as high as their trade costs in manufactured goods suggest that focusing trade facilitation efforts on that sector may be particularly productive, especially given the importance of this sector for poverty reduction and more inclusive and sustainable development.