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Intraregional Trade Costs in Asia-A Primer

  • Yann Duval
  • Chorthip Utoktham

    (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))

While much has been said about the need to promote intraregional trade and the importance of reducing associated trade costs, quantitative estimates of such costs have been lacking. A new comprehensive measure of international trade costs is applied in this paper to calculate ad valorem trade costs within and between 4 Asian subregions, including ASEAN and SAARC. Extra-regional trade costs of the 4 subregions with free trade areas outside Asia, such as NAFTA and the EU as well as their trade costs with China, India, and Japan are also calculated. The analysis concludes with an evaluation of the importance of tariff in overall trade costs. Sharp differences across Asian subregions are identified. ASEAN is found to have much lower intra-subregional trade costs than other Asian subregions, as well as mostly lower trade costs with free trade areas outside Asia. While SAARC intra-subregional trade costs remain exceedingly high, South Asia is found to have made the most progress in reducing such costs since 2003. North and Central Asia, which groups together Russia and landlocked economies in transition, still faces prohibitive trade costs-sometimes exceeding 300% tariff equivalent. Within the East and North-East Asia subregion, a subset of three countries - Japan, China, and Republic of Korea - is found to have the lowest intra-group trade costs of any country groups examined in this paper, although the three countries have not signed free trade agreements with each other. Estimates of trade costs between Asian subregions and China, India and Japan, highlight how effective China has been in reducing its trade costs with ASEAN as well as other Asian and non-Asian subregions, achieving generally lower international trade costs than Japan as of 2007. Tariff costs account for a small portion of the overall international trade costs of Asian subregions - typically 10% or less - confirming the need for trade policy makers and negotiators to sharpen their focus on reducing non-tariff barriers.

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Paper provided by United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its series Working Paper Series with number 110.

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Length: 20 pages
Date of creation: Jul 2010
Date of revision: Jan 2011
Handle: RePEc:unt:wpaper:swp110
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  1. Helble, Matthias & Shepherd, Ben & Wilson, John S., 2007. "Transparency, trade costs, and regional integration in the Asia Pacific," Policy Research Working Paper Series 4401, The World Bank.
  2. Shepherd, Ben, 2010. "Trade costs and facilitation in APEC and ASEAN: Delivering the goods?," MPRA Paper 21531, University Library of Munich, Germany.
  3. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, 01.
  4. Yann Duval & Chorthip Utoktham, 2009. "Behind-the-Border Trade Facilitation in Asia-Pacific: Cost of Trade, Credit Information, Contract Enforcement and Regulatory Coherence," Working Paper Series 209, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  5. Dennis Novy, 2011. "Gravity Redux: Measuring International Trade Costs with Panel Data," CESifo Working Paper Series 3616, CESifo Group Munich.
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