Trade facilitation December 2015 Bangkok, Thailand Cosimo Beverelli (WTO) Rainer Lanz (WTO)
Content What is trade facilitation? Measuring trade facilitation Estimating the impact of trade facilitation on trade 2
What is trade facilitation? Trade facilitation can be differentiated along two dimensions Broad or narrow Narrow: administrative procedures at the border Broad: includes also behind-the-border measures, e.g. domestic regulation, technical barriers to trade, quality of infrastructure Soft or hard infrastructure Soft: transparency, customs management and other intangible institutional aspects Hard: includes physical transport and ICT infrastructure 3
Trade Facilitation at the WTO the Trade Facilitation Agreement WTO Members concluded negotiations on a new Trade Facilitation Agreement at the Bali Ministerial - (WT/L/911). The Agreement contains two sections Section I: Provisions Section II: Substantive Special and Differential Treatment (S&D) measures Category A, B and C provisions countries can self-determine timing of implementation For Category C commitments Conditional on the acquisition of implementation capacity through technical assistance The Agreement will enter into force once it has been ratified by 2/3 of the WTO Membership. By the time of the Nairobi Ministerial Conference, 63 Members have ratified the Agreement and 108 are needed for implementation WTO Trade Agreement Facility launched in July 2014 Needs assessment, provision of information, project preparation grants 4
Measuring Trade Facilitation (some indicators) World Bank Doing Business: Trading across borders Cost to export (import), Number of days to export (import), Number of documents required to export (import) Assumptions: 20-feet container with value of US$20,000 exported by local business with 201 employees located in the country s most populous city. New methodology! World Bank Logistics Performance Index (LPI) 1 (worst) to 5 (best) Based on survey of logistics operators (2007, 2010, 2012, 2014) Six sub-indicators: i) Customs; ii) Infrastructure; iii) Ease of arranging shipments; iv) Quality of logistics services; v) Tracking and tracing, vi) Timeliness OECD Trade Facilitation Indicators (TFIs) 0 (worst) to 2 (best) Based on public and private sector questionnaires 97 variables grouped into 16 sub-indicators - can be linked to WTO TFA provisions 5
Estimating the impact of trade facilitation on trade Two main approaches General equilibrium analysis E.g. Zaki (2014) and WTR (2015) Gravity modelling E.g. Moise and Sorescu (2013) and WTR (2015) using the OECD TFIs Two margins (as trade facilitation can affect both fixed and variable cost) Intensive margin Extensive margin (export diversification) Different types of data Standard trade data Firm level or transaction based data 6
Hoekman and Nicita (2011) Assess the impact of trade policy and trade costs in a cross-sectional gravity framework (106 countries; 2006) Calculate multilateral resistance terms using distance and border following Baier and Bergstrand (2009) Controls: GDP, Population, MR, landlocked, distance, border, language, bilateral trade agreement, trade policy var.s, trade costs 7
Hoekman and Nicita (2011) Trade Costs (averages by country group) How much would trade increase for low income countries if their trade policy and trade costs indicators improved to the average levels of middle-income countries? 8
Export diversification extensive margin of trade Impact of trade facilitation on the number of eight-digit product lines exporter by developing countries to the EU Poisson regression to estimate count model Dennis and Shepherd (2011) estimate the impact of cost to export on the number of products exported to the EU (not bilateral; but by 2-digit sectors) If the costs to export are reduced by 1%, the number of products exported to the EU increase by 0.3%. Persson (2013) estimates the impact of time to export on the number of products exported to EU countries (bilateral) If the time to export is reduced by 1%, the number of exported differentiated and homogenous products to a trading partner in the EU increases by 0.6% and 0.3%, respectively. Assess the effect of the WTO Trade Facilitation Agreement on two extensive margins related to export diversification Beverelli at al. (2015) 9
Dennis and Shepherd (2011) 10
Persson (2013) 11
Beverelli et al. (2015) Assess the effect of the WTO Trade Facilitation Agreement on two extensive margins related to export diversification Number of products by export destination: npd ij npd ij varies between 43 for Sub-Saharan Africa and 501 for East Asia and Pacific Number of export destinations served by product: ndp ik ndp ik varies between 1 for Sub-Saharan Africa and 16 for East Asia and Pacific OECD Trade Facilitation Indicators (use simple average across 12 TFIs) Regressions: OLS, Poisson ML and Negative Binomial (NB) ML Use only new products or new destinations to address reverse causality concerns Estimate increases in extensive margins if countries improve TFI scores to global median (or regional median) Implementation of the WTO TFA could increase npd ij by 15.7% and ndp ik by 34.9% for SSA countries 12
Beverelli at al. (2015) 13
Trade facilitation and trade using firm level data Studies using the WB Enterprise Surveys Shepherd (2013) Assess the impact of time to export in the share of imported inputs, direct exports and indirect exports Fractional logit model WB ES (2006-2010): 5,000 firms in 85 countries and 11 sectors Firm level control variables and country-sector-year FE Hoekman and Shepherd (2015) Assess impact of trade facilitation, i.e. time to clear customs, on firm level exports and imports WB Enterprise Surveys (2006-2011) Firm level control variables and country-sector-year fixed effects Find stronger evidence for the impact of trade facilitation on exports as compared to imports A 10% reduction in time to export is associated with an 1.1% export gain Other studies use country-specific (firm level) datasets, e.g. Volpe Martincus et al. (2015) estimate the effect of customs-related delays on firm s export based on Uruguay customs transaction data 14
Shepherd (2013) How does time impact the share of imported inputs, direct exports and indirect exports? 15
Hoekman and Shepherd (2015) How does the impact of trade facilitation vary by firm size and sector? 16