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Quantitative Assessment of the Benefits of Trade Facilitation

Listed author(s):
  • Peter Walkenhorst


  • Tadashi Yasui


Trade transaction costs (TTCs) related to border procedures vary depending on the efficiency and integrity of interacting businesses and administrations, the characteristics or kind of goods, and the size and type of businesses. Total costs may be seen as being composed of directly incurred costs, such as expenses relating to supplying information and documents to the related authority, and indirectly incurred costs, such as those arising from procedural delays. Empirical studies suggest that directly and indirectly incurred TTCs each amount to 1-15 per cent of traded goods’ value. Moreover, empirical evidence suggests that TTCs for agro-food products are higher than those for manufactured goods, as agro-food shipments are subject to special border procedures, such as sanitary and phyto-sanitary controls. Also, small and medium-sized enterprises face cost-disadvantages. In light of this diversity in TTCs, the potential for the realisation of benefits from trade facilitation varies across countries, sectors, and types of traders. In cases where best practices are already applied, further efficiency gains will be difficult to achieve. But if border clearance costs are substantially above those encountered under best practices, room for improvement through suitable measures of trade facilitation will tend to exist. The model-based analysis of the economic impacts of trade facilitation carried out in this study differs from earlier research by taking several salient features of import and export procedures into account. In particular, the differing characteristics of direct and indirect TTCs are represented, and country-specific differences in trade facilitation potential are reflected according to empirical information on border waiting times and survey-based evidence on the quality of border processes. In addition, the higher TTCs for agro-food products and small and medium-sized enterprises are incorporated into the analysis. The analysis does not evaluate the economic and trade impact of specific trade facilitation measures or instruments, such as those that might result from a possible future WTO agreement on trade facilitation. Instead, the aim of the assessment is to better represent empirical characteristics of the border process in model-based analysis and to identify those features that crucially affect the results and that, therefore, deserve to be further explored in future analysis. Several scenarios of hypothetical, multilateral trade facilitation efforts are evaluated, focusing on the comparison of scenarios rather than the overall welfare gains that might result from trade facilitation.

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Paper provided by EconWPA in its series International Trade with number 0401008.

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Date of creation: 29 Jan 2004
Handle: RePEc:wpa:wuwpit:0401008
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  1. David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, vol. 103(7), pages 2935-2959, December.
  2. Verwaal, Ernst & Donkers, Bas, 2003. "Customs-Related Transaction Costs, Firm Size and International Trade Intensity," Small Business Economics, Springer, vol. 21(3), pages 257-271, November.
  3. repec:wsi:wschap:9789812701350_0018 is not listed on IDEAS
  4. Wilson,John S. & Mann, Catherine L. & Otsuki, Tsunehiro, 2003. "Trade facilitation and economic development : measuring the impact," Policy Research Working Paper Series 2988, The World Bank.
  5. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685.
  6. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
  7. Thomas W. Hertel & Terrie Walmsley & Ken Itakura, 2005. "Dynamic Effects Of The "New Age" Free Trade Agreement Between Japan And Singapore," World Scientific Book Chapters,in: Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 18, pages 483-523 World Scientific Publishing Co. Pte. Ltd..
  8. Malcolm, Gerard, 1998. "Adjusting Tax Rates in the GTAP Data Base," GTAP Technical Papers 315, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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