Assessing the Global Effect of Trade Facilitation: Evidence from the MIRAGE Model

This paper provides an attempt to model trade facilitation in a multi-regional and multi-sectoral computable general equilibrium (CGE) model, MIRAGE. Following Decreux and Fontagné (2009) in modeling trade facilitation, administrative barriers are assumed to be the tip of the iceberg in terms of cost. I extend their model using more accurate ad-valorem equivalents (AVEs) of red tape costs, computed from a gravity model, and introduced in the CGE model. The novelty of those AVEs is that they take into account the effect of bureaucracy, internet coverage, corruption and geographical barriers on the time to trade. The results show that, on the regional level, developing countries in Africa and Asia, especially Sub-Saharan countries, the Middle East and North Africa gain much more from trade facilitation than developed ones. They benefit from significant export diversification thanks to such a process. On the sectoral level, vegetables, textiles and electronics witness a more important expansion than other products since they are more time-sensitive. Finally, effects of trade facilitation in the long-run are much higher than in the short run.