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Trade Facilitation and the EU-ACP Economic Partnership Agreements: Who Has the Most to Gain?

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).

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Paper provided by Lund University, Department of Economics in its series Working Papers with number 2007:8.

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Length: 30 pages
Date of creation: 24 Apr 2007
Date of revision: 01 Oct 2007
Publication status: Published in Journal of Economic Integration, 2008, pages 518-546.
Handle: RePEc:hhs:lunewp:2007_008
Note: This paper has been published under the titel "Trade Facilitation and the EU-ACP Economic Partnership Agreements".
Contact details of provider: Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en

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  1. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2004. "A Consistent, Ad-Valorem Equivalent Measure of Applied Protection Across the World: The MAcMap-HS6 Database," Working Papers 2004-22, CEPII research center.
  2. 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.
  3. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
  4. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
  5. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  6. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
  7. repec:rus:hseeco:122439 is not listed on IDEAS
  8. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  9. David Hummels & Georg Schaur, 2012. "Time as a Trade Barrier," NBER Working Papers 17758, National Bureau of Economic Research, Inc.
  10. Greenaway, David & Milner, Chris, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-85, December.
  11. Will Martin & Kym Anderson, 2006. "Agricultural Trade Reform and the Doha Development Agenda," World Bank Publications, The World Bank, number 6889, September.
  12. Soloaga, Isidro & Wilson, John S. & Mejia, Alejandro, 2006. "Moving forward faster : trade facilitation reform and Mexican competitiveness," Policy Research Working Paper Series 3953, The World Bank.
  13. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  14. John S. Wilson & Catherine L. Mann & Tsunehiro Otsuki, 2003. "Trade Facilitation and Economic Development: A New Approach to Quantifying the Impact," World Bank Economic Review, World Bank Group, vol. 17(3), pages 367-389, December.
  15. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  16. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
  17. Hildegunn Kyvik Nordås & Enrico Pinali & Massimo Geloso Grosso, 2006. "Logistics and Time as a Trade Barrier," OECD Trade Policy Papers 35, OECD Publishing.
  18. Yvan Decreux & Lionel Fontagné, 2006. "A Quantitative Assessment of the Outcome of the Doha Development Agenda," Working Papers 2006-10, CEPII research center.
  19. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
  20. Michael Engman, 2005. "The Economic Impact of Trade Facilitation," OECD Trade Policy Papers 21, OECD Publishing.
  21. John S. Wilson & Catherine L. Mann & Tsunehiro Otsuki, 2005. "Assessing the Benefits of Trade Facilitation: A Global Perspective," The World Economy, Wiley Blackwell, vol. 28(6), pages 841-871, 06.
  22. Dennis, Allen, 2006. "The impact of regional trade agreements and trade facilitation in the Middle East and North Africa region," Policy Research Working Paper Series 3837, The World Bank.
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