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Trade Policy, Trade Costs, and Developing Country Trade

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  • Hoekman , Bernard

    ()
    (The World Bank)

  • Nicita, Alessandro

    (UNCTAD)

Abstract

This paper briefly reviews new indices of trade restrictiveness and trade facilitation that have been developed at the World Bank. The paper also compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect trade costs. Based on a gravity regression framework, the analysis suggests that tariffs and non-tariff measures continue to be a significant source of trade restrictiveness for low-income countries despite preferential access programs. This is because the value of trade preferences is quite limited: a new measure of the relative preference margin developed in the paper reveals that this is very low for most country-pairs. Most countries with very good (duty-free) access to a market generally have competitors that have the same degree of access. The empirical analysis suggests that measures to improve logistics performance and facilitate trade are likely to have the greatest positive effects in expanding developing country trade, increasing the trade impacts of lowering remaining border barriers by a factor of two or more.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4797.

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Length: 23 pages
Date of creation: 01 Dec 2008
Date of revision:
Handle: RePEc:wbk:wbrwps:4797

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Keywords: Tariffs; nontariff measures; trade facilitation; logistics; economic development; Doha Round;

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References

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  1. Matthias Helble & Ben Shepherd & John S. Wilson, 2009. "Transparency and Regional Integration in the Asia Pacific," The World Economy, Wiley Blackwell, vol. 32(3), pages 479-508, 03.
  2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics, Boston College Department of Economics 593, Boston College Department of Economics.
  3. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
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  6. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2009. "The Margins of US Trade," CEP Discussion Papers dp0906, Centre for Economic Performance, LSE.
  7. Francois, Joseph & Manchin, Miriam, 2013. "Institutions, Infrastructure, and Trade," World Development, Elsevier, Elsevier, vol. 46(C), pages 165-175.
  8. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, Elsevier, vol. 71(1), pages 72-95, March.
  9. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  10. Martijn Burger & Frank van Oort & Gert-Jan Linders, 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation," Spatial Economic Analysis, Taylor & Francis Journals, Taylor & Francis Journals, vol. 4(2), pages 167-190.
  11. Lawless, Martina, 2008. "Deconstructing Gravity: Trade Costs and Extensive and Intensive Margins," Research Technical Papers 5/RT/08, Central Bank of Ireland.
  12. Djankov, Simeon & Freund, Caroline & Pham, Cong S., 2006. "Trading on time," Policy Research Working Paper Series 3909, The World Bank.
  13. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2009. "The Margins of U.S. Trade (Long Version)," NBER Working Papers 14662, National Bureau of Economic Research, Inc.
  14. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, Elsevier, vol. 64(1), pages 29-63, October.
  15. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  16. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
  17. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, Elsevier, vol. 77(1), pages 77-85, February.
  18. Alessandro Nicita & Marcelo Olarreaga, 2007. "Trade, Production, and Protection Database, 1976--2004," World Bank Economic Review, World Bank Group, World Bank Group, vol. 21(1), pages 165-171.
  19. Baier, Scott L; Bergstrand, Jeffery H; Mariutto, Roland., 2010. "The Growth of Bilateralism," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 12, Competitive Advantage in the Global Economy (CAGE).
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