Text for Ferro, E., J. Wilson and P. McConaghy (2015), Building the infrastructure for trade:
developments in trade facilitation and aid-for-trade, Chapter 4 in O. Morrissey, R. Lopez and K.
Sharma (Eds) Handbook on Trade and Development, Edward Elgar (pp. 62-86)
Chapter 4
Building the Infrastructure for Trade: Developments in Trade
Facilitation and Aid-for-Trade
Esteban Ferro, John S. Wilson, and Peter McConaghy
4.1
Trade Facilitation: Components, Context, and Policy Priorities
Over the past few years, a wealth of empirical evidence has been gathered on the relative effects
of implementing policies designed to simplify and standardize trade. Moving goods from the
farm or factory gate to markets overseas often involves a long and complicated supply chain,
with the risk that a single bottleneck along the way can seriously affect the entire process.
Connecting efficiently to markets is particularly critical for developing countries, whose firms
and farmers typically do not enjoy a sufficient margin of international competitiveness to absorb
high transaction costs. A firm’s ability to move its products across borders quickly, reliably, and
cheaply can mean the difference between its success and failure in integrating into the global
economy.
Trade facilitation is associated with the reduction of at-the-border transaction costs other
than tariffs, which essentially involves the simplification and standardization of customs
formalities and administrative procedures related to international trade (Portugal-Perez and
Wilson 2012). In the past few years there has been renewed interest in trade costs and trade
facilitation for two main reasons. The first is that today’s international trade landscape is
increasingly characterized by global value chains that span national boundaries. Intermediate
inputs now represent more than half of the goods imported by OECD countries and close to
three-fourths of the imports of large developing economies, such as China and Brazil (Draper et
al. 2012). The rise of global value chains and trade in intermediate inputs is connected to the
1
decreases in traditional tariff barriers across all countries. Now the focus has moved to reducing
costs of trade elsewhere.
The second reason for the renewed interest in trade facilitation is the realization that trade
liberalization has not had the expected positive impact on developing countries’ exports. The
Uruguay Round of the WTO successfully reduced tariff rates in both developed and developing
countries alike. Even with preferential treatment negotiated in the Uruguay Round, least
developed countries have not been able to increase their exports to foreign markets. On the
contrary, least developed countries now have a lower share of total trade than they did a decade
ago (UNCTAD 2011). Trade costs are falling faster in developed than developing countries,
which makes integrating poorer countries into the world economy even more challenging (Arvis
et al, 2013).
Trade liberalization creates opportunities for development. However, other factors
including trade costs (see Chapter 4 this volume) determine the extent to which trade
opportunities are realized. Within this context, expanding trade through lowering transaction
costs and providing developing countries with technical assistance on implementing reforms to
lower trade costs have become prominent in the trade policy dialogue.
With increased attention placed on the importance of lowering trade costs, there has been
increased emphasis on enabling and financing trade facilitation reforms. These efforts have
coalesced around global aid-for-trade initiatives which are part of the Doha Development Round
of the World Trade Organization (WTO). Aid-for-trade aims at helping developing countries,
particularly least-developed countries, establish the trade-related skills and infrastructure that is
needed to implement and benefit from WTO agreements and to expand their trade (WTO 2011).
Aid-for-trade commitments have increased steadily, from USD 15 billion in 2000 to USD 45
billion in 2010. However, as will be addressed later in this chapter, the impact of this aid is
debatable.
This chapter presents an overview of key concepts associated with trade facilitation in the
context of current economic conditions, shifts in the global economy, and movements in the
broader international trade policy agenda. The chapter covers definitions (Section 4.2), analytical
and conceptual frameworks measuring trade facilitation and the effects (Section 4.3) and
assesses global aid-for-trade efforts (Section 4.4). It also provides a survey of the empirical
2
literature for both topics, providing a snapshot of where data and theory stands in explaining
trade facilitation and aid-for-trade interventions.
Empirical analysis presented gives particular attention to the proposed gains from
implementing trade facilitation reform. Empirical evidence and analytical concepts are presented
in the following areas of trade facilitation: customs procedures and border protection, transport
and transit costs, information and communications technology, and the role of product standards
and technical regulations on trade flows. The chapter concludes in Section 4.5 with a discussion
of policy priorities for developing countries moving forward.
The literature presented here should assist policymakers, development practitioners,
researchers, and public and private officials to understand core concepts and key developments
related to trade facilitation and global aid-for-trade initiatives. This information should help
stakeholders prioritize trade facilitation reform, structure global aid-for-trade interventions, and
better understand what works and why. This knowledge will prove increasingly important as
trade costs and trade facilitation play an ever larger role in the global trade policy arena, and as
global economic structures continue to shift towards greater integration and a heavier reliance on
supply chains.
4.2
Defining Trade Facilitation
There is no single definition of trade facilitation, contributing to the complexity of understanding
and measuring the costs associated with it. The term can be widely defined as any policy
measure set to diminish trade costs. The WTO refers to trade facilitation as “the simplification
and harmonization of international trade procedures.” Wilson et al. (2003) offer an early review
of the definition. In a narrow sense, trade facilitation simply addresses the logistics of moving
goods through ports or customs at the border. A broader definition includes the environment in
which trade transactions take place, including the transparency of regulatory environments,
harmonization of standards, and conformance to international or regional regulations (Wilson et
al. 2003).
More recently, trade facilitation has been thought of along two dimensions: investment in
“hard” versus “soft” infrastructure. Hard infrastructure refers to tangible infrastructure such as
3
roads, highways, ports, and railroads while soft infrastructure refers to dimensions related to
transparency, customs management, the business environment, and other, less tangible
institutional variables (Portugal-Perez and Wilson 2012; see Figure 4.1). Defining trade
facilitation along the lines of its hard and soft dimensions makes it easier to compare the benefits
and costs of investment and policy reform.
Figure 4.1 about here
The various definitions of trade facilitation share common elements of simplification,
harmonization, and transparency of procedures associated with international trade. As an
example of the links between transparency and trade facilitation, two of the three GATT articles
on trade facilitation (Article VIII and Article X) explicitly promote transparency in the
application and publication of trade policy instrument (Helble et al. 2007). Another element
common to the definitions is that of customs management. Customs management refers to a
broad array of procedures and techniques including the aims of simplifying, harmonizing, and
providing due process for such procedures. Trade facilitation definitions also generally highlight
regulatory issues that underpin a country’s trading system with the highlight being on developing
a regulatory environment that promotes efficient and transparent trading structures.
4
Box 4.1 The Evolving Definitions of Trade Facilitation
Community of Eastern and Southern Africa (COMESA): Trade facilitation means the coordination and rationalization of trade procedures and documents relating to the movement of
goods from their place of origin to their destination [and] trade procedures means activities
related to the collection, presentation, processing and dissemination of data and information
concerning all activities constituting international trade (COMESA Treaty 1994, Chapter 2
Article 2).
Asia Pacific Economic Cooperation (APEC): The use of technologies and techniques which
will help members to build up expertise, reduce costs and lead to better movement of goods and
services (APEC Economic Committee 1999). Trade facilitation generally refers to the
simplification, harmonization, use of new technologies, and other measures to address procedural
and administrative impediments to trade (APEC Principles on Trade Facilitation 2002).
World Trade Organization (WTO) and United Nations Conference on Trade and
Development (UNCTAD): Simplification and harmonization of international trade procedures,
including activities, practices, and formalities involved in collecting, presenting, communicating,
and processing data required for the movement of goods in international trade (WTO website and
UNCTAD, E-Commerce and Development Report 2001, p 180).
Organization for Economic Cooperation and Development (OECD): Simplification and
standardization of procedures and associated information flows required to move goods
internationally from seller to buyer and to pass payments in the other direction (OECD,
TD/TC/WP(2001)21 attributed to John Raven).
United Nations Economic Commission for Europe (UNECA): A comprehensive and
integrated approach to reducing the complexity and cost of the trade transaction process, and
ensuring that all these activities can take place in an efficient, transparent, and predictable
manner, based on internationally accepted standards, and best practices (UNECA draft document
3/13/2002).
Sources: Wilson et al. (2002) and authors
5
4.3
Measuring Trade Facilitation
Measuring trade costs and the associated benefits to trade facilitation remains an evolving
challenge for researchers. Direct measures of trade costs are available for a few components such
as transportation and insurance costs, and policy barriers such as tariffs, but not for other
components such as bureaucratic red tape (Chen and Novy 2012)) and non-tariff barriers. In
addition, data coverage is often limited to a few countries, industries, products or years
(Anderson and van Wincoop, 2004). With this being said, in recent years there has been
significant progress made in collecting relevant data and in applying innovative empirical
techniques to measure the impact of trade facilitation on trade flows.
Data Sources to Measure Trade Facilitation
Although researchers are still limited by data availability, there is an increasingly large set
of data available to measure the trade costs that can be reduced by trade facilitation. Data
generally captures the complexity and cost of trading, from the time and cost of moving product
through customs to the quality of infrastructure such as ports and roads needed to support trading
measures. The World Bank Doing Business Surveys and the Logistics Performance Index are
two data sources commonly used to measure trade facilitation. Other sources include indicators
compiled from the World Economic Forum’s Global Competitiveness Report, the World Bank’s
World Development Indicators, governance indicators from Transparency International, national
level customs data, and increasingly, firm-level data.
The Doing Business Surveys rank economies on the ease of doing business based on the
simple average of the percentile rankings on ten topics including starting a business, dealing with
construction permits, registering property, getting credit, protecting investors, and paying taxes.
Recent data from the World Bank’s 2012 Doing Business Report dataset show the wide variety
of national experiences in this area, both in terms of procedural complexity and cost. As can be
seen from Figures 4.2 and 4.3, OECD countries generally impose fewer barriers (i.e., number of
documents or border procedures required for export) and are more efficient (i.e., number of days)
at exporting goods than developing countries. Among the developing regions, it is Latin America
and the Caribbean which comes closest to the procedure and cost levels observed in the OECD.
6
Sub-Saharan Africa tends to have the weakest performance both on cost and the number of
procedures.
Figures 4.2 & 4.3 about here
The Logistics Performance Index (LPI) is based on a worldwide survey of operators on the
ground (global freight forwarders and express carriers), providing feedback on the logistics
“friendliness” of the countries in which they operate and those with which they trade. They
combine in-depth knowledge of the countries in which they operate with informed qualitative
assessments of other countries with which they trade. The LPI is the weighted average of the
country scores on six key dimensions: efficiency of the clearance process, quality of trade and
transport-related infrastructure, ease of arranging competitively priced shipments, competence
and quality of logistics services, ability to track and trace consignments, and timeliness of
shipments in reaching a destination within the scheduled or expected delivery time. As
demonstrated by Figure 4.4, infrastructure has been a key area of progress for countries across
income levels since 2007.
Figure 4.4 about here
Regarding the methodology used to measure the impact of trade facilitation on trade the gravity
model first developed by Tinbergen (1962) is generally the theoretical foundation for much of
the empirical work being done on trade facilitation. The traditional gravity model drew on
analogy with Newton's Law of Gravitation. A mass of goods or labor or other factors of
production supplied at origin i, Yi, is attracted to a mass of demand for goods or labor at
destination j, Ej, but the potential flow is reduced by the distance between them, dij. Strictly
applying the analogy, bilateral trade is defined as Xij = YiEj/dij and is modelled accordingly.
Anderson (1979) and Anderson and van Wincoop (2003) developed the theoretical framework
for the gravity model based on microeconomic foundations which gave the model even more
popularity for empirical applications. To date, the gravity model is the workhorse for the
empirical literature on trade facilitation and trade costs (see Chapter 4 this volume). Most of the
studies described in the following section make use of the gravity model in one way or another.
7
4.4
Quantifying the Effects of Trade Facilitation
Empirical research assessing the impact of trade facilitation has to address three issues: defining
and measuring trade facilitation indicators; choosing an econometric methodology to estimate
the impact of trade facilitation on trade flows; and designing a scenario to estimate the effect of
improved trade facilitation on trade flows (Portugal-Perez and Wilson 2012). In order to review
the existing trade facilitation literature we will break up the studies based on how they define
trade facilitation. Most studies take a narrow view of trade facilitation and concentrate on
analyzing the impact of one specific aspect of trade facilitation on trade flows. For example,
Hummels (2007) has a series of papers that analyze the impact of transportation costs; Freund
and Weinhold (2004) analyze the impact of ICT; and Wilson with several co-authors analyze the
impact of product standards on trade flows. These are reviewed below under the respective
narrow concepts used. A number of studies make use of a broader definition of trade facilitation
and build these and other variables — such as institutional quality — into their frameworks.
These are reviewed in the second part of this section.
Transport and Transit Costs
Given the importance of complex modern supply chains, the cost of transport features
heavily in international trade. Whenever it is necessary to move goods physically from one place
to another, there are transport costs to be borne. There are three primary factors that influence
transport costs. First, the availability and quality of underlying infrastructure influences the
overall cost of transport services. For example, deficient road infrastructure adds time and cost to
moving goods. Second, the level of competition in the transport sector can affect the price that
end users pay for transport services. In a market with limited competition and high barriers to
entry, service providers can drive a wedge between the prices they charge and the costs they
incur. Increasing competition and promoting transparent regulation can help reduce rents
incurred by providers and decrease overall transport costs. Third, economies of scale and
positive network externalities are important factors to consider, especially for poor and small
countries. Economies of scale are accrued by many users relying on transport infrastructure and
can help decrease costs. Ensuring compatibility with international standards can act as a positive
8
network externality and can help bring down overall transport costs. Developing regional
transport hubs can have the same effect.
Hummels (2007) shows that air transport has become significantly cheaper compared with
sea transport, which has remained at a fairly constant cost level over recent decades. As a result,
trade via air freight has increased rapidly, both in absolute terms and relative to trade via ocean
shipping. Hummels (2007) also shows that although some transport costs have fallen, they have
not gone down as quickly as other costs affecting international trade, such as tariffs. Hummels’
work is essential to explaining how advancements in technology have significantly contributed to
declining transport costs which in turn promote trade and integration.
Geography can play an important role in determining overall transport and transit costs.
For example, there is strong evidence that shows that being geographically landlocked greatly
increases the costs of transporting goods. MacKellar et al (2002) find that the cost of shipment
for a landlocked country is double that of other countries. Similarly, according to Limao and
Venables (2001) being landlocked reduces exports by 30%. MacKellar et al (2002) find that
being landlocked lowers economic growth by 1.5% per year on average.
Policy measures can greatly influence the overall cost of being landlocked. Mattoo et al
(2012) found a troubling pattern: many landlocked African countries restrict trade in the very
services that connect them with the rest of the world. On average, telecommunications and airtransport policies are significantly more restrictive in landlocked countries than elsewhere. Lack
of or poor policy decisions compound the cost of transit, resulting in inadequate transport
infrastructure, absent or ineffective insurance policies and trade finance (in particular at regional
level), weak border infrastructure which creates queues and bottlenecks, lack of cooperation
between customs authorities of neighboring countries and among government agencies at the
border, and weak institutions and cooperation with the private sector along transit corridors.
Customs Procedures and Border Protection
National customs administrators can significantly impact the overall level of trade costs
facing importers and exporters. Delays can translate into additional trade expenses. Customs
administrators have responsibilities that can greatly impact trade costs. They apply the correct
rate of duty based on an analysis of product characteristics and origin, in addition to respecting
any non-tariff barriers that may be relevant. In cooperation with health and quarantine
9
authorities, national customs agencies are usually also involved in ensuring that imported goods
do not violate certain national standards. They will often also cooperate with law enforcement
agencies in an effort to detect and deal with shipments of contraband, or potential security
threats. Moreover, customs and other border agencies sometimes levy service fees that must be
paid by traders, in addition to the usual direct charges of loading and unloading merchandise at
the port.
Economies that have made significant improvements to the customs environment have
streamlined customs procedures through adopting electronic data interchange systems. This
allows traders to exchange information with customs and other control agencies electronically.
For example, procedural improvements in East Africa have reduced the average clearance time
for cargo crossing the Kenya-Uganda border from almost two days to only seven hours (qtd. In
Al-Madani et al 2012). Electronic processing of customs documentation saves time and money,
and decreases bureaucratic obstacles and opportunities for graft by reducing interactions with
officials. Economies are also linking agencies through an electronic single window, which allows
traders to file standard information and documents through a single entry point to fulfill all
import, export, and transit-related regulatory requirements. Other steps to maximize efficiency of
customs procedures include promoting transparency through prompt publication and providing
easy access to documentation requirements. Similarly, customs administrations are increasingly
moving to risk-based inspection systems whereby physical inspections are conducted based on
the potential risk of consignments. This enhances efficiency by focusing customs examinations
on the set of products deemed to be most risky.
Customs Procedures and Border Protection: Empirical Evidence
A number of studies have examined the effect of improved customs procedures on trade
flows. Yang (2008) examines developing countries that have hired private firms to conduct preshipment inspections of imports and finds that countries implementing such inspection programs
subsequently experience large increases in import duty collections. He finds these programs are
often cost effective, with improvements in import duty collections in the first five years of a
typical inspection program amounting to 2.6 times the program’s costs. Although his findings
speak to the effectiveness of pre-shipment inspections, he finds the growth rate of tax revenues
10
does not change appreciably with the introduction of private firms conducting pre-shipment
inspections.
Arson, Cadot, and Olarreaga (2006) build a model highlighting the contribution of private
surveillance firms to the generation of information. Their model describes how incentives for
under-invoicing and collusive behavior between importers and customs are affected by the
introduction of pre-shipment inspections (PSI). Theoretically the introduction of PSI has an
ambiguous effect on the level of fraud. Empirically, however, econometric results suggest that
the introduction of PSI services increased under-invoicing in Argentina and Indonesia and
reduced it in the Philippines. Overall the authors’ findings suggest surveillance and monitoring
and procedural streamlining are an important component of implementing PSI systems.
Other studies show the detrimental effects of time delays on trade flows. Using a dataset on
the days it takes to move standard cargo from the factory gate to the ship in 98 countries,
Djankov et al. (2010) used a difference gravity equation to estimate the effects of trade costs on
trade. The difference gravity equation evaluates the effect of time delays on the relative exports
of countries with similar endowments and geography and facing the same tariffs in importing
countries. Comparing exports from similar countries to the same importer allows them to
difference out importer effects, such as remoteness and tariffs, which are important to trade. For
example, they examine whether Brazilian/Argentine exports to the United States are decreasing
in Brazilian/Argentine time costs of trade, after controlling for the standard determinants of
trade, such as relative size, relative distance, and relative income. The authors find that for every
additional day that a product is delayed, trade is reduced by at least one per cent. Sadikov (2007)
finds that signatures and registration procedures reduce overall exports by increasing transaction
costs although the impact varies across goods as differentiated products are more sensitive to
trade procedures than export volumes of homogeneous goods (Martinez-Zarzoso and MarquezRamos (2008) find similar results).
Using detailed data on transit, documentation, and ports and customs delays on Africa’s
exports collected by Doing Business at the World Bank, Freund and Rocha (2010) examine the
effects of transit, documentation, and ports and customs delays on Africa’s exports. The authors
find that transit delays have the most economically and statistically significant effect on exports:
a one-day reduction in inland travel time leads to a seven per cent increase in exports. Put
11
another way, a one day reduction in inland travel time translates to a 1.5 percentage point
decrease in all importing-country tariffs.
Information and Communications Services
Telecommunication services are crucial to ensuring that traders can effectively develop and
share information required to trade. Advances in technology including the internet, mobile and
landline phone use, and IT-enabled services (broadcasting, radio) have significantly altered how
firms trade and exchange information, and how governments create enabling and regulatory
environments for trade. Over the past decade developing countries have seen rapid growth in
their use of information and communications technology (ICT), particularly in the proliferation
of mobile telephony, broadband connectivity, and IT-enabled services (broadcasting, radio). For
example, mobile phone access has increased to 30.9 billion people in 2010 (a 68% penetration
rate) up from 0.3 billion (a 4.4% penetration rate) in 2000 (World Bank 2011). Hummels (2007)
suggests that the rapid proliferation of ICT has created a third era in cross-border trade, whereby
people across great distances are being connected, altering both trading patterns and the way in
which countries integrate. By enhancing efficiencies and promoting access to markets and
capital, ICT has the opportunity to improve delivery of both public and private services to the
underserved. It also has the potential to make trading cheaper because it is now easier than
before to obtain information on foreign market conditions, product standards, and consumer
preferences.
Freund and Weinhold (2004) provide the first empirical evidence in support of this
dynamic. They find that a 10% increase in the number of a country’s web hosts is associated
with an export gain of around 0.2%. Although this effect is statistically significant, it is relatively
small in economic terms. The authors also find that the development of the internet does not
seem to have brought about any significant changes in the impact of distance on trade. This
finding is in line with the scenario in which the internet helps facilitate information exchange and
makes it easier for firms to enter a market, but cannot alter variable costs as captured by distance
(Wilson and Maur (2011) and Ferro (2011)).
Fink, Mattoo and Neagu (2005) seek to provide empirical evidence for the intuition that
communication costs contribute to trade costs. The authors also seek to examine whether the
inclusion of the magnitude and variation of communication costs across partner countries can
12
add value to existing explanations of the pattern of trade. The authors develop a simple multisector model of "impeded" trade that generates hypotheses in a gravity-type estimation
framework. The authors find that international variations in communication costs have a
significant influence on bilateral trade flows. Using the Rauch classification of product
heterogeneity, the estimates suggest that the impact of communication costs on trade in
differentiated products is as much as one-third larger than on trade in homogenous products.
Product Standards and Technical Regulations
The importance of standards and technical barriers to trade (TBT) on international trade
patterns has increased in recent years, in large part because of increasing consumer concerns
surrounding food and product safety, greater participation in global value chains by emerging
markets, and decreases in traditional tariff barriers across all countries. Standards and TBT
include technical regulations, conformity assessment procedures, and compliance restrictions.
They can help facilitate trade by promoting interoperability and ensuring product safety and
environmental stewardship. Outdated and overly burdensome standards-related measures,
however, can reduce competition, limit innovation, and increase trading costs. They can impose
additional costs on exporters to the extent that it is necessary to alter production processes in
order to comply with such rules in the importing country.
What is the impact of standards on trade flows? Chen et al. (2006) draw on the World
Bank Technical Barriers to Trade Survey database, which includes 619 firms in 17 developing
countries. Their results suggest that technical regulation of industrial countries have a negative
effect on the propensity of developing country firms to export. They estimate that testing
procedures and lengthy inspections cause exports from the developing countries included in the
sample to drop by nine percent and three percent respectively. It is also estimated that standards
– in particular standards that differ across foreign countries – reduce developing country firms’
propensity to export, impeding market entry, and lowering the likelihood that these firms will
export to more than three markets by seven percent. Results presented by Kee et al. (2009)
suggest that poor countries (and those with the highest poverty headcount) tend to be more
restrictive, but they also face the highest trade barriers on their export bundle. This is partly
explained by the fact that agriculture protection is generally larger than manufacturing
protection. Non-tariff barriers including TBTs contribute more than 70 percent on average to
13
world protection, underlying their importance for any study on trade protection. More recently,
Ferro et al. (2013) similarly find that stricter standards on agricultural imports decrease the
propensity to trade. This detrimental effect is greater for exports originating in developing
countries compared to those from developed and middle income countries.
Other research focused on the effect of standards and TBT has found they can have trade
enhancing effects. Portugal-Perez, Reyes, and Wilson (2010) used a database of European
standards for electronic products collected by the World Bank to estimate the net impact of
internationally harmonized European standards on European Union (EU) imports of electronics.
Their main finding is that internationally harmonized EU standards expand EU imports of
electronic products. Conversely, European standards that are not aligned with international
norms have a lower effect on EU imports, or even a negative one. Overall, these results suggest
that standards harmonization is an important element of coordinating international trade and
promoting compatibility and quality assurance.
Chen and Mattoo (2008) have investigated the relationships between regional agreements,
standards, and trade. Using a constructed panel data that identifies the different types of
agreements at the industry level and applying it using a modified Heckman two-stage estimator
with the control of multiple fixed effects, the authors find that regional agreements increase the
trade between participating countries but not necessarily with the rest of the world. Harmonizing
standards may reduce the exports of excluded countries, especially in markets that have raised
the stringency of standards. Mutual recognition agreements, on the other hand, are more
uniformly trade promoting unless they contain restrictive rules of origin, in which case intraregional trade increases at the expense of imports from other countries.
A topic of increasing attention is the effects of imposing domestic versus internationally
recognized standards on trade. Mangelsdorf, Portugal-Perez, and Wilson (2012) examines how
food safety standards set domestically affect China’s export performance. The results show that
one additional international harmonized standard leads to a 0.38 to 0.64 percent increase in food
exports, equivalent to $114 to $193 million. The results also suggest that standards in China that
are harmonized to international ones have a larger impact on exports than purely domestic
Chinese standards. The larger impact of international standards over domestic ones can in part be
explained by the fact that international standards signal certain common quality and safety
14
guarantees that domestic standards may not. This finding is also echoed in Czubala, Shepherd,
and Wilson (2009), where the authors use a sample-selection gravity model to examine the
impact of EU standards on African textiles and clothing exports. The authors find robust
evidence that non-harmonized standards reduce African exports of these products. EU standards
which are harmonized to ISO standards are less trade restricting, suggesting that efforts to
promote African exports on manufacturers may need to be complemented by measures to reduce
the cost of harmonizing standards.
Studies with a Broad Definition of Trade Facilitation
The methodology proposed by Wilson, Mann, and Otsuki (2003) was the first to measure
the impact of trade facilitation on trade performance using a gravity model. Thus, their work has
highlighted the overall economic importance of trade facilitation in the process of further
international economic integration. They developed an approach estimating the gains to reform
in the area of trade transaction costs, focusing on four dimensions of trade facilitation: port
infrastructure, customs environment, regulatory environment, and e-business infrastructure. They
constructed four indicators for Asia Pacific Economic Cooperation (APEC) countries for a single
year by applying single averages to 13 primary variables, which were mostly collected from the
World Economic Forum. Using model estimates, the authors find that intra-APEC trade could
increase by US$254 billion, or 21% of intra- APEC trade flows, if APEC members with belowaverage indicators improved capacity halfway to the average for all members, about half the
increase being derived from improved port efficiency. Table 4.1 presents country-specific gains
from the gravity model analysis in Wilson et al. (2003).
Table 4.1 about here
Subsequently, Wilson, Mann, and Otsuki (2005) repeat this methodology for 75 countries
worldwide using a more robust set of indicators. Each of the four trade facilitation measures is
constructed from two survey data inputs to avoid depending too heavily on any one survey
question or source. Using simulations based on their gravity model, they find that the total gain
15
in trade flows in manufacturing goods from improvements in trade facilitation halfway to the
global average level yields an increase in global trade of $US377 billion.
Developing adequate institutions to facilitate trade has been the focus of recent research.
Francois and Manchin (2007) examine the influence of infrastructure, institutional quality,
colonial and geographic context, and trade preferences on the pattern of bilateral trade. They use
principle components to construct two indicators on infrastructure and two indicators on
institutional quality from various primary indicators, and find that infrastructure and institutional
quality are significant determinants not only of export levels, but also of the likelihood exports
will take place at all. Their results support the notion that export performance, and the propensity
to take part in the trading system, depends on institutional quality and access to well-developed
transport and communications infrastructure.
Finally, Portugal-Perez and Wilson (2012) estimate the impact on the export performance
of developing countries of trade facilitation measures along a “hard” and “soft” dimension first
outlined in Wilson, Mann, and Otsuki (2005). The authors construct four new aggregate
indicators related to trade facilitation from a wide range of primary indicators using factor
analysis, a statistical modeling technique that explains the correlation among a set of observed
variables through unobserved “common factors” (Figure 4.1). Estimates show that trade
facilitation reforms do improve the export performance of developing countries. This is
particularly true with investment in physical infrastructure and regulatory reform to improve the
business environment. The findings provide evidence that the marginal effect of the transport
efficiency and business environment improvement on exports appears to be decreasing in per
capita income. In contrast, the impact of physical infrastructure and information and
communications technology on exports appears increasingly important the richer a country
becomes. The authors also find statistical evidence on the complementarity between hard
infrastructure and soft infrastructure.
Trade Facilitation and the Extensive Margin of Trade
All the above studies concentrate on the impact of trade facilitation on the intensive margin
of trade (or the amount of trade by value or volume). There are few studies that investigate the
effects of trade facilitation on the extensive margin of trade (or the breadth of trade in terms of
16
number of exporting firms, export diversity, or destination markets). Research reveals
considerable developmental benefits from broadening an economy’s extensive margin of trade
through export diversification – from insulating an economy from external demand shocks to
facilitating movement up the value chain. With specific regard to trade facilitation, Dennis and
Shepherd (2011) and Persson (2012), use the number of exported products as a measure of the
extensive margin. Both studies find that inefficient trade procedures are associated with fewer
export products. Persson (2012) further finds that this negative effect is more pronounced for
differentiated products than it is for homogeneous goods. Shepherd (2010) focuses on
geographical diversification rather than product diversification, and concludes that trade
facilitation also has the potential to increase the number of export markets.
4.4
Aid for Trade
The previous sections demonstrated the extensive evidence of the benefits of a responsive,
predictable and simple trade environment. The impact of improved ports, modernized customs,
and reduced red tape on the trade intensity of countries is clear. Better trade facilitation results in
greater trade, and allows more firms to reach more destinations with more products. Thus, trade
facilitation provides policies necessary for export-led growth and diversification, an important
component of overall economic development for developing countries. It comes as no surprise
then that development agencies all over the world have been pushing for public investment and
foreign aid to target trade facilitation. Aid for trade, thus, is financial and technical assistance
that facilitates the integration of developing countries into the global economy through initiatives
that expand trade (Wilson and Hoekman 2010).
Aid for trade is an integral part of regular official development assistance (ODA). Donors
have been providing substantial amounts of aid to trade-related programs for many years.
However, the scope of aid for trade has expanded considerably. During the 1986-1994 Uruguay
Round of trade negotiations, trade related assistance was mainly aimed at technical support to
help developing countries negotiate and implement trade agreements. Subsequently, the scope
expanded to include building supply-side capacities, for instance in private sector development
and trade-related infrastructure. Now the agenda also includes trade-related structural adjustment
programs and other trade-related needs (OECD/WTO 2006).
17
The Doha Round of World Trade Organization (WTO) negotiations that started in 2001
were based on the recognition that trade liberalization alone was not enough for the development
prospects of many low-income countries. Some developing countries could not benefit from a
multilateral liberalization based on reciprocal market access, or even from preferential market
access, because they would need to incur additional costs in order to realize the full benefits of
new market opportunities. In many cases they lack the necessary exporting infrastructure (e.g.
efficient ports, adequate roads, reliable electricity and communications) or lack the necessary
technology and knowledge to meet product standards prevailing in high value markets (sanitary
measures, technical barriers, certification, etc.). To benefit from liberalization developing
countries would need to make public investments in infrastructure and institutions as well as
private investment in productive capacity.
During the 2005 Hong Kong Ministerial Conference of the Doha Development Agenda,
the World Bank (WB) and the International Monetary Fund (IMF) led a taskforce that proposed
the “Aid for Trade” initiative. The initiative was aimed at supporting the development of trade in
developing countries. The aid for trade agenda stemmed from two considerations. First, the need
for adequate trade related assistance to mitigate the detrimental effects of further multilateral
trade liberalization from the Doha Round. Liberalization incurs adjustment costs as resources are
moved from one sector to another in the process of reform. Whereas it may take decades for
multilateral trade reform to deliver gains to developing countries, the adjustment costs are
automatic and usually upfront. Several developing countries, most notably preference receiving
and net food importing countries, are likely to face further costs to adjust to a more liberalized
trading system (e.g., increase in food imports, loss of tariff revenues, increased import
competition).
The second consideration was that for developing countries, the necessary investments to
develop their trade environment to overcome supply-side constraints are particularly large and
the faculty to meet them is particularly small. Within this enlarged framework, G8 countries at
Gleneagles committed to doubling 2005 volumes of Aid for Trade before the year 2010;
furthermore they agreed that the initiative had to be used as a complement to the Doha Round,
not as a substitute for market access during negotiations. Since its inception, aid for trade has
been integrated into broader development strategies, with objectives focusing on
competitiveness, economic growth and poverty reduction. Donors are harmonizing their
18
procedures and aligning their support around these strategies. Aid-for-trade flows continue to
grow and reached USD 40 billion in 2009 – an increase of 60% since 2005.
Scope of Aid for Trade
Trade is not a sector – it covers a wide range of activities and encompasses both goods and
services. Thus, the scope of aid for trade is likewise broad and difficult to define. The WTO Task
Force concluded that for the purposes of measuring the volume of aid-for-trade flows and
assessing additionality ODA includes aid for the following categories:
i)
Technical assistance for trade policy and regulations: for example, helping countries to
develop trade strategies, negotiate trade agreements, and implement their outcomes;
ii) Trade-related infrastructure: for example, building roads, ports, and telecommunications
networks to connect domestic markets to the global economy;
iii) Productive capacity building (including trade development): for example, supporting the
private sector to exploit their comparative advantages and diversify their exports;
iv) Trade-related adjustment: helping developing countries with the costs associated with
trade liberalization, such as tariff reductions, preference erosion, or declining terms-oftrade; and,
v)
Other trade-related needs: if identified as trade-related development priorities in partner
countries’ national development strategies.
Within each category there can be great diversity in program or project types as well as in
feasible valuation approaches and metrics (OECD, 2007). Some donors adopt a narrow definition
of the aid-for-trade agenda (e.g. only trade policy and regulation and trade development), while
for others it consists of a broader subset of activities identified by the Task Force. Basing the
monitoring of aid for trade on the OECD Creditor Reporting System (CRS) implies that all aidfunded investments in transport, energy and telecommunications are considered to be traderelated. However, such investments have or could have outcomes that are not primarily traderelated. This raises the question of how to evaluate programs and projects that are not primarily
trade-related, but are part of the broader aid-for-trade agenda as depicted in Figure 4.5. Some
19
assistance from multilateral and regional development banks (i.e. investments in the tradable
sector and trade finance) takes the form of non-concessional lending or low concessional
financing, which have a development impact but are not counted as aid for trade.
Figure 4.5 about here
The key issue is how to differentiate between an aid-for-trade agenda on the one hand and
the general economic development agenda, on the other. It is clear that domestic productivity
will be crucial in determining developing countries’ capacity to benefit from further trade
liberalization. Building supply-side capacity could extend as far as expenditures on education,
health and environment expenditure that may be crucial to competitiveness. Some countries have
indeed built their export capacity around educated labor force or environmentally-sound tourism.
Infrastructure is clearly essential to building export capacity and while in theory it would
be useful to distinguish trade-related infrastructure as a category in itself, in practice such a
distinction is not feasible both because all infrastructure in the end contributes to productivity
and the ability to compete (e.g. water for irrigation, sanitation for meeting SPS standards).
Aid for Trade: Facts and Figures
The Aid-for-Trade Initiative has achieved remarkable progress in a short time: partner
countries are increasingly prioritizing trade in their development strategies and clarifying their
needs by developing operational plans. Donors are improving aid-for-trade delivery and scaling
up resources. In 2006, aid for trade grew by more than 3% per annum, and more than 20% in
2007. In 2008 commitments for aid for trade had a further increase of 41%; however, with the
onset of the 2008 financial crisis, commitments in 2009 fell by 1%. The latest available data
shows that aid for trade has regained momentum and commitments in 2010 reached USD 44.7
billion, an increase of around 14% from 2009 levels (Figure 4.6). The volume of aid for trade in
2010 has roughly doubled since the beginning of the initiative in 2005. Furthermore, calculations
suggest high disbursements of commitments – i.e. pledges are honored as money is spent.
20
Figures 4.6 and 4.7 about here
The largest share of aid for trade continues to go to Asia (with 44%), although flows to
Africa (with 35%) are also increasing steadily (Figure 4.7). Overall, the distribution of aid over
the different trade-related categories has remained relatively stable over this period: economic
infrastructure and productive capacity-building showed similar increases, with strong support
going to trade development programs and technical assistance for human and institutional
capacity-building in trade policy and regulations. Even though the objective of aid for trade is
being met in terms of volumes of aid, its impact on exports, welfare, and growth of recipient
countries is not as clear. The following sub-section will review the literature on the impacts of
aid on the recipient country’s overall economy and the followed by a detailed examination of the
existing evidence of the impact of aid on trade.
Empirical Evidence on the Impact of Aid and Trade
Foreign aid can affect a recipient country’s overall economy in three main ways. The first
is the obvious income effect and beyond this direct income effect, an international transfer
between two countries is likely to have important relative price effects between donor and
recipient and on factors of production inside the recipient’s economy. A fair summary of the vast
literature on the macro relationships between aid and growth is that there is no robust evidence of
either a positive or a negative correlation. This is not a surprise considering the different
opposing channels in which aid interacts with the overall economy, as discussed above.
Furthermore, the impact of aid might depend on other domestic economic policies, institutions,
and other conditions. Bourguignon and Sundberg (2007) argue that the mixed impact of aid and
growth found in the literature is to be expected considering the heterogeneity of aid motives and
the complex causality chain linking foreign aid to final project outcomes.1 The objective for the
aid for trade initiative is to improve trade facilitation that will results in greater global trade. This
is a direct objective that is simpler to analyze than the impact of aid on growth. The studies
presented in the following section summarize the existing literature on aid for trade.
1
Ferro and Wilson (2011) analyze whether aid objectives are accomplished by analyzing the firm perception’s of
the areas that aid is expected to improve.
21
We concentrate on the limited empirical literature on aid for trade, the handful of studies
that analyze the effect of aid on developing countries’ exports. Gamberoni and Newfarmer
(2009) aim to detect countries that are under-performing in trade and that receive less Aid for
Trade than their potential demand. The authors construct a trade performance indicator which is
assimilated to the potential Aid for Trade demand of each developing country. This index
includes trade variables and internal capacity constraints related to institutions, infrastructure and
trade policy. Finally, to identify countries that receive less Aid for Trade than expected, they
introduce this index of trade performance into a cross-sectional estimation explaining Aid for
Trade per recipient GDP, controlling for the level of development and the potential effectiveness
of assistance. This work highlights the need to raise aid to countries that are under-receiving and
can be used as a benchmark for monitoring the trade performance of recipients. Nevertheless, it
does not assess the key question of the effectiveness of these flows on trade outputs.
Brenton and Uexkull (2009) analyze the effectiveness of export development programs.
Using a difference in difference approach, they aim at isolating the impact of the policy
interventions and draw four main conclusions. First, most export development programs have
coincided with or predated stronger export performance. Second, such programs appear to be
more effective where there is already significant export activity. Third, there is some concern
about the “additionality” of the programs as support may be channeled to sectors that would have
prospered anyway. Finally, conclusions strongly depend on what one postulates would have
happened in the absence of the policy intervention, so the definition of a credible counterfactual
is of utmost importance for the evaluation of technical assistance for exports.
Lederman et al. (2010) evaluate the effectiveness of Export Promotion Agencies (EPAs) on
exports. It should be noted that these agencies are mostly financed by foreign assistance in the
poorest developing countries. They find that these institutions have, on average, a positive and
significant impact on exports, but with heterogeneous effects across regions and with Africa
particularly lagging behind. The authors also note that private-sector EPAs (but receiving a large
share of public sector funding) are the best performers. Brenton and von Uexkull (2009) also find
that technical assistance for exports targeted to some specific products enhances, on average,
export performance. Nevertheless, using a difference-by difference approach, they conclude that
this effect is not entirely due to the export development program, and that the allocation of funds
should be directed more to sectors that remain behind.
22
Helble, Mann, and Wilson (2011) make one of the first attempts to analyze how foreign aid
spent on trade facilitation increases trade flows in developing countries. The authors use a
gravity model of bilateral trade and find that the bulk of the relationship between aid and trade
appears to come from a narrow set of aid flows directed toward trade policy and regulatory
reform, rather than broader aid-for-trade categories directed toward sectoral trade development
or infrastructure development. Based on elasticities estimated over 16 years of trade and aid data
for 40 donor countries and about 170 country trading pairs, the results suggest that a 1% increase
in aid-for-trade facilitation is associated with $290 million of additional exports from the aid
receiving countries. Cali and te Velde (2010) found similar positive results and evaluate whether
aid for trade has improved export performance. They find that aid for trade facilitation, and to
some extent aid for trade policy and regulations, helps reduce the cost of trading (both in terms
of exports and imports). In addition, their results suggest that aid to economic infrastructure
increases exports, whereas aid to productive capacity appears to have no significant impact on
exports. The authors correctly point out that aid for trade is possibly endogenous to exports;
particularly aid to productive capacity. For instance, if better performing sectors tend to receive
more aid for trade than other sectors, it would generate an upward bias in the aid coefficient. To
address this endogeneity, the authors instrument aid for trade with the degree of respect for civil
and political liberties measured by the Freedom House Index and with an index proposed by
Gartzke (2009) that measures the “affinity of nations”. The authors argue that many donors
choose recipients based upon development and democratic measures like these which make these
indicators correlated with aid but not with exports. However, the authors acknowledge that their
instruments are not appropriate for sectoral analysis, as they only vary across country-year and
not across country-sector-year.
An important limitation prevalent in any econometric assessment is the potential reverse
causality between aid and trade. Indeed, aid for trade is expected to have an impact on exports,
however, aid may also be determined by export performance. If, for instance, better performing
countries are rewarded with more aid, estimates of aid for trade coefficients would be biased
upward. Ferro, Portugal, and Wilson (2010) propose an identification strategy that helps to
overcome the reverse causality of the trade-aid relationship. Using input-output data, the authors
exploit the differential service-intensities of manufacturing sectors to evaluate the impact of aid
in five service sectors (transport, communications, energy, banking/financial services, and
23
business services) on exports of downstream manufacturing sectors for 132 countries between
2002 and 2008. The estimates, in general, show a positive effect of aid to services on
downstream manufacturing exports of developing countries. Aid to transport, energy, and
banking sectors have consistently a significant and positive impact on downstream
manufacturing exports. The effectiveness of aid to transportation in terms of exports growth
diminishes for country groups with higher income, whereas the effectiveness of aid to energy
and business services increases with the income of the group.
There is a clear evidence of the benefits on trade of improving the trade facilitation
environment in a country. There also seems to be strong evidence that aid for trade is having a
positive impact on exports of developing countries. However, it is important to keep in mind that
this does not necessarily mean that aid for trade is generating growth and reducing poverty in
recipient countries; research is required to provide robust evidence.
4.6
Conclusion: Empirical Analysis informing Policy Priorities
The analytical and empirical framework presented here outlines what trade facilitation is and
how it impacts trade flows and broader economic development. The chapter has also provided an
overview of the global aid-for-trade movement, including size and scope of aid-for-trade as well
as empirical insight into its effectiveness. Through this analysis, it is possible to identify policy
priorities with regards to both trade facilitation and aid-for-trade moving forward that takes into
account the global trade and economic environment.
A review of existing literature almost uniformly indicates that trade facilitation has a
significant and positive effect on trade flows. Research has repeatedly found that policies aimed
to make trade less costly and complex – through improving infrastructure, modernizing customs
and border procedures, and strategic investments in information and communications services have resulted in tangible increases to trade flows. This has been found in research looking at
specific components of trade facilitation such as customs procedures (Arson, Cadot, and
Olarreaga 2006 and Djankov et al 2010), information and communications services (Freund and
Weinhold 2004) and product standards (Ferro et al. 2013; Chen and Mattoo 2008; Mangelsdorf
et al. 2012). Empirical analysis using composite indicators to construct broader views of trade
facilitation have also found positive trade effects to targeted improvement in trade facilitation
24
policies (Francois and Manchin 2007; Portugal-Perez and Wilson 2012;). On the cost-side,
research has determined that inefficient trading procedures stemming from geography or trading
delays consistently results in lost trade (Freund and Rocha 2010).
Much of the research to date has provided policymakers with information about the
effectiveness of possible interventions, and has helped national and international stakeholders
prioritize potential trade-related interventions. Overall, empirical evidence suggests a consensus
that policies aiming to reduce the cost and complexity of trading will result in tangible benefits in
the form of additional trade. These policies are of particular importance given that many
developing countries have inefficient border procedures that make traders suffer from delayed
and unreliable delivery, costly customs clearance, and missed business opportunities.
Empirical and analytical knowledge regarding trade facilitation will no doubt continue to
remain important as developing countries continue to play an expanded role in international
supply chains and international efforts at trade liberalization continue to move forward. Looking
forward, further research that analyzes the relative costs and benefits of implementing particular
trade facilitation reform program would be particularly valuable. This detailed analysis may
allow for a heightened understanding of which trade facilitation reforms deliver the most
effective results in terms of export growth and why.
Aid-for-trade – the financial and technical assistance that facilitates the integration of
developing countries into the global economy through initiatives that expand trade - is a rapidly
growing component of overall development assistance. It is an important tool to ensure
developing countries develop the technical expertise needed to realize benefits of trade
liberalization and global integration. This emergence is in part due to a perceived inability of
developing countries to benefit from existing and prospective market access opportunities that
the trading system or specific countries/regions offer – such as preferential (duty-free, quotafree) market access (Hoekman and Wilson 2010). Although constituting a broad section of
activities, aid-for-trade initiatives have generally focused on technical assistance for trade policy
and regulations, developing trade-related infrastructure (ports, roads, and telecommunications),
productive capacity building, and helping with adjustment costs associated with trade
liberalization.
25
With empirical evidence supporting the positive economic effects of aid-for-trade, donors
and recipient governments alike will remain interested in expanding and further understanding
how to maximize ongoing aid-for-trade efforts. The importance of aid-for-trade is made even
stronger given the slow recovery from the ongoing financial crisis and the stalled Doha
Development Round of WTO trade negotiations. Future research and policy analysis should
center on identifying the relative effects of specific aid-for-trade interventions with the goal of
prioritizing the most effective aid-for-trade related interventions, given country and regionalspecific characteristics. This prioritization may prove particularly important as donors face
increasingly difficult choices as to where to place limited financial and technical resources.
Overall, while evidence supports the view that both trade facilitation policies and aid for
trade is having a positive impact on exports of developing countries, it is important to keep in
mind that this does not necessarily imply these measures are generating growth and reducing
poverty in recipient countries. The connections between trade facilitation and aid-for-trade with
growth and poverty reduction, among other dynamic interactions, are worthy focuses of future
research.
The trade literature is evolving from studying how countries trade to trying to understand
how firms trade. The trade facilitation and the aid-for-trade literature must also move in the same
direction. Understanding the needs of firms and what their constraints are to open to foreign
markets is essential for countries’ trade strategies. Clearly, it is also imperative to understand
these needs to ensure the efficient use of aid-for-trade resources. Further, the literature on trade
facilitation and aid-for-trade should move away from the existing workhorse model of trade—the
gravity model—to better understand causality rather that simple correlations. Finally, the use of
impact evaluation in trade is challenging but not impossible. Policy makers and donors must
come to understand the necessity of these types of studies to precisely determine the effect of
both aid and any project intended to reduce trade costs.
26
References
Al-Madani, A. M., D. Kaberuka, H. Kuroda, T. Miro, and L. A. Moreno (2012), How to Make Trade
Easier, Project Syndicate, June 27, http://www.project-syndicate.org/.
Anderson J. and E. Van Wincoop (2003), Gravity with Gravitas: A solution to the Border Puzzle,
American Economic Review, 93, 170-192
Anderson, J. E., and D. Marcouiller (2002), Insecurity and the Pattern of Trade: An Empirical
Investigation, Review of Economics and Statistics, 84 (2), 342-52.
Anderson, J. E., and E. Van Wincoop(2004), Trade Costs, Journal of Economic Literature, 42 (3), 691751.
Anderson, J. E., and P. Neary (1994), Measuring the Restrictiveness of Trade Policy, World Bank
Economic Review, 8 (2), 151-169.
Anson, J., O. Cadot, A. Estevadeordal, J. de Melo, A. Suwa-Eisenmann, and B. Turmurchudur (2005),
Rules of Origin in North-South Preferential Trading Arrangements with an Application to NAFTA,
Review of International Economics, 13 (3), 501-517.
Anson, J., O. Cadot and M. Olarreaga (2006), Tariff Evasion and Customs Corruption: Does PreShipment Inspection Help?, Contributions in Economic Analysis & Policy 5 (1): n. pag.
Arvis, J-F., G. Raballand and J-F. Marteau (2007), The Cost of Being Landlocked: Logistics Costs and
Supply Chain Reliability, Washington, DC: The World Bank, Policy Research Working Paper No.
4258.
Arvis, J-F., M. Mustra, L. Ojala, B. Shepherd, and D. Saslavsky (2012), Connecting to Compete: Trade
Logistics in the Global Economy. Washington, DC: The World Bank.
Arvis, J-F., Y. Duval, B. Shepherd, and C. Utoktham (2013), Trade Costs in the Developing World:
1995-2010, Washington, DC: The World Bank, Policy Research Working Paper Series No 6309.
Borchert, I., B. Gootiiz, A. Grover and A. Mattoo (2012), Landlocked or policy locked? How services
trade protection deepens economic isolation, Washington, DC: The World Bank, Policy Research
Working Paper Series No 5942.
Bourguignon, F. and M. Sundberg (2007), Aid effectiveness: opening the black box. American Economic
Review, 97 (2), pp. 316-321.
Brenton P., and E. von Uexkull (2009), Product specific technical assistance for exports – has it been
effective? Journal of International Trade and Economic Development, 18 (2), pp. 235- 254.
Calì, M. and D. W. te Velde (2011), Does Aid for Trade Really Improve Trade Performance?, World
Development, 39(5), pages 725-740.
Chen, M. X. and A. Mattoo (2008), Regionalism in standards: good or bad for trade?, Canadian Journal
of Economics, 41(3), pages 838-863.
Chen, M. X., T. Otsuki and J. S. Wilson (2006), Do standards matter for export success?, Washington,
DC: The World Bank, Policy Research Working Paper Series No 3809.
Chen, N. and D. Novy (2012), On the Measurement of Trade Costs: Direct vs. Indirect Approaches to
Quantifying Standards and Technical Regulations, World Trade Review 11 (3), pp.401-414.
COMESA (1994), Treaty Establishing the Common Market of Eastern and Southern Africa,
http://www.comesa.int/attachments/article/28/COMESA_Treaty.pdf.
27
Czubala, W., B. Shepherd, and J.S. Wilson (2009), Help or Hindrance? The Impact of Harmonised
Standards on African Exports, Journal of African Economies, 18, 711-44.
Dennis, A. and B. Shepherd (2011), Trade Facilitation and Export Diversification, The World Economy
34 (1), 101-22.
Djankov, S., C. Freund, and C. S. Pham (2008), Trading on Time, The Review of Economics and
Statistics, 92 (1), 166-73.
Djankov, S., O. Hart, C. McLiesh, and A. Shleifer (2008), Debt Enforcement around the World, Journal
of Political Economy 116 (6), 1105-149.
Draper, Peter, Uri Dadush, Gary Hufbauer, James Bacchus, and Robert Lawrence (2012), The Shifting
Geography of Global Value Chains: Implications for Developing Countries and Trade Policy.
Geneva: World Economic Forum.
Ferro, E., A. Portugal-Perez and J. S. Wilson (2011), Aid to the Services Sector: Does it Affect
Manufacturing Exports?, Washington, DC: The World Bank Policy Research Working Paper
Series No. 5728.
Ferro, E. and J. S. Wilson (2011), Foreign aid and business bottlenecks : a study of aid effectiveness,
Washington, DC: The World Bank Policy Research Working Paper Series No 5546.
Ferro, E., J. S. Wilson and T. Otsuki (2013), The Effect of Standards on Developing Countries
Agricultural Exports, Washington, DC: The World Bank Policy Research Working Paper Series No
6518.
Francois, J. and M. Manchin (2007), Institutions, infrastructure, and trade, Washington, DC: The World
Bank Policy Research Working Paper Series No 4152.
Fink, C., A. Mattoo, and C. Naugu (2005), Assessing the impact of communication costs on international
trade, Journal of International Economics, 67(2), pages 428-445.
Freund, C. and N. Rocha (2010), What Constrains Africa's Exports? Washington, DC: The World Bank
Policy Research Working Paper No 5184.
Freund, C. and D. Weinhold (2004), The effect of the Internet on international trade, Journal of
International Economics, 62(1), pages 171-189.
Gamberoni, E. and R. Newfarmer (2009), Aid for trade: matching supply and demand. Washington, DC:
The World Bank Policy Research Working Paper No. 4991.
Gartzke, E. (2009), The Affinity of Nations Index, 1946–2002, version 4.0 and related documents.
<http://dss.ucsd.edu/~egartzke/htmlpages/data.html>.
Helble, M., C. Mann and J. S. Wilson (2012). Aid-for-trade facilitation, Review of World Economics,
148(2), pp. 357-376.
Helble, M., B. Shepherd and J. S. Wilson (2007), Transparency and Trade Facilitation in Asia Pacific:
Estimating the Gains from Reform, Canberra: World Bank & Australian Department of Foreign
Affairs and Trade.
Helpman, E., M. Melitz and Y. Rubinstein (2008), Estimating trade flows: Trading partners and trading
volumes. The Quarterly Journal of Economics, 123 (2), 441–487.
Hoekman, B. and S. Wilson (2010), Aid for Trade: Building on Progress Today for Tomorrow’s Future,
Washington, DC: The World Bank Policy Research Working Paper Series No 5361.
Hufbauer, G., J. S. Wilson and J. Muir (2012), Aid for Trade: An Effective Strategy. Washington, DC:
Peterson Institute for International Economics / World Bank Research Group.
28
Hummels, D. L., (2007), Transportation Costs and International Trade in the Second Era of Globalization,
Journal of Economic Perspectives, 21(3), 131-154.
Lederman D., M. Olarreaga and L. Payton (2010), Export Promotion Agencies: Do They Work?, Journal
of Development Economics, 91 (2), pp. 257-65.
Limão, N. and A. J. Venables (2001), Infrastructure, Geographical Disadvantage, Transport Costs, and
Trade, World Bank Economic Review, 15 (3), 451-479.
Kee, H., A. Nicita, and M. Olarreaga (2009), Estimating Trade Restrictiveness Indices, The Economic
Journal 119 (534), 172-99.
Mackellar L., A. Wörgötter and J. Wörz (2002), Economic Growth of Landlocked Countries, in G.
Chaloupek, A. Guger, E. Nowotny and G. Schwödiauer (eds), Ökonomie in Theorie und Praxis,
Springer, Berlin, pp.213-226.
Mangelsdorf, A., A. Portugal-Perez, and J. S. Wilson (2012), Food Standards and Exports: Evidence for
China, World Trade Review 11 (3), pp 507-526.
Martinez-Zarzoso, I. and L. Marquez-Ramos (2008), The Effect of Trade Facilitation on Sectoral Trade,
The B.E. Journal of Economic Analysis & Policy, 8 (1), pages 42-55.
Mattoo, A., I. Borchert, B. Gootiz and A. Grover (2012), Landlocked or Policy Locked? How Services
Trade Protection Deepens Economic Isolation, Washington, DC: The World Bank Policy Research
Working Paper No 5942.
Maur, J-C. and J. S. Wilson (2011), Trade Costs and Facilitation: Open Trade and Economic
Development. Cheltenham: Edward Elgar.
McCallum, J. (1995), Borders Matter: Canada-U.S. Regional Trade Patterns. The American Economic
Review 85(3): 615-23.
Minor, P., T. Orliac and E. Moise (2011), Trade Facilitation Indicators: The Impact on Trade Costs, Paris:
OECD, Trade Policy Working Papers No. 118.
OECD (2012), Development: Aid to Developing Countries Falls Because of Global Recession. News
release, April 4, Paris: OECD
http://www.oecd.org/newsroom/developmentaidtodevelopingcountriesfallsbecauseofglobalrecession.
htm.
OECD/WTO (2011), Aid for Trade at a Glance 2011, Paris: OECD.
OECD/WTO (2009), Aid for Trade at a Glance 2009, Paris: OECD.
OECD/WTO (2007), Aid for Trade at a Glance 2007, Paris: OECD.
OECD/WTO (2006), Aid for Trade: making it effective, Paris: OECD.
Peng, B. (2008), Trade Facilitation Provisions in Regional Trade Agreements in Asia and the Pacific,
New York: UNESCAP Trade and Investment Division Staff Working Paper no. 01/08.
Persson, M. (2012), From Trade Preferences to Trade Facilitation: Taking stock of the Issues, The OpenAccess, Open-Assessment E-Journal, 6, 2012-17, pp. 1-33.
Portugal‐Perez, A., J. Reyes and J. S. Wilson (2010), Beyond the Information Technology Agreement:
Harmonisation of Standards and Trade in Electronics, The World Economy, 33 (12), pages 18701897.
Portugal‐Perez, A., and J. S. Wilson (2012), Export Performance and Trade Facilitation Reform: Hard and
Soft Infrastructure, World Development, 40 (7), pp: 1295-1307.
29
Sadikov, A. (2007). Border and Behind-the-Border Trade Barrier and Country Exports. Washington, DC:
IMF Working Paper WB/07/292.
Staples, B. (1998). Trade Facilitation, http://www.acp-eu-trade.org/library/files/Staples%20%20October%201998%20-%20Trade%20Facilitation.pd.f.
Suwa-Eisenmann, A. and T. Verdier (2007), Aid and trade, Oxford Review of Economic Policy, 23 (3),
pp. 481-507.
Tinbergen, J. (1962), Shaping the World Economy: Suggestions for an International Economic Policy.
New York: Twentieth Century Fund.
UNCTAD (2011), The Least Developed Countries Report 2011: The Potential Role of South-South
Cooperation for Inclusive and Sustainable Development. Geneva: UNCTAD
United Nations (2012), World Economic Situation and Prospects 2012. New York: UN-DESA, United
Nations Publication.
Wilson, J. S., C. Mann and T. Otsuki (2003), Trade Facilitation and Economic Development: A New
Approach to Quantifying the Impact, World Bank Economic Review 17(3): 367-89.
Wilson, J. S., C. Mann, and T. Otsuki (2005), Assessing the Benefits of Trade Facilitation: A Global
Perspective, The World Economy, 28(6): 841-871.
Wilson, J. S., C. Mann, Y. P. Woo, N. Assanie, and I. Choi (2002), Trade Facilitation: A Development
Perspective in the Asia-Pacific Region. Singapore: Report to APEC Secretariat.
Wilson, J. S., and T. Otsuki (2004), Standards and Technical Regulations and Firms in Developing
Countries: New Evidence from a World Bank Technical Barriers to Trade Survey, Washington, DC:
The World Bank, Mimeo.
World Bank (2005), Global Economic Prospects: Trade, Regionalism, and Development, Washington,
DC: The World Bank.
World Bank (2012), Doing Business 2012: Doing Business in a More Transparent World. Washington,
DC: The World Bank.
World Bank Independent Evaluation Group (2011), Capturing Technology for Development. Washington,
DC: World Bank.
Yang, D. (2008), Integrity for Hire: An Analysis of a Widespread Customs Reform, Journal of Law and
Economics, 51(1), pages 25-57.
30
Figure 4.1 Aggregate Trade Facilitation Indicators (Portugal-Perez and Wilson 2012)
HARD INFRASTRUCTURE INDICATORS
Quality of port
Infrastructure
Availability of latest ICT
Technology
ICT
Level of technical
absorption
Physical
Infrastructure
Quality of airports
infrastructure
Extent of Business
Internet Use
Quality of roads
infrastructure
Government
prioritization of ICT
Quality of railroad
infrastructure
SOFT INFRASTRUCTURE INDICATORS
Government
Transparency
Business
Environment
Public Trust for
Government
Irregular Payments in
Exports and Imports
Measures to Combat
Corruption
Number of Documents
to Export
Border and Transport
Efficiency
Number of Days to
Export
Number of Documents
to Import
Number of Days to
Import
31
Figure 4.2 Number of documents required to export 2007 and 2012
Source: World Bank Doing Business (2007 and 2012)
Figure 4.3 Time to Export 2007 and 2012
Source: World Bank Doing Business (2007 and 2012)
32
Figure 4.4 Percentage change in LPI component as measured against the highest
performer, 2007-2012
Table 4.1 Trade Facilitation and Trade Flows early 2000s
Country
Chile
China
Indonesia
Korea
Mexico
Peru
Philippines
Russia
Thailand
Customs Environment
Δ exports (%) Δ imports (%)
2
9
1
21
1
3
2
8
0
5
1
13
1
25
5
8
1
Port Efficiency
Δ exports (%)
Δ imports (%)
21
20
74
2
51
9
15
14
37
1
98
5
100
3
73
36
15
5
Source: Wilson et al. (2003)
33
Figure 4.5 Aid-for-Trade Scope
Source: OECD/WTO 2011
Figure 4.6 Aid-for-Trade, 1995-2010 (USD millions)
50,000
40,000
30,000
20,000
10,000
-
Trade Policies & Regulations & Adjustments
Productive Capacity
Economic Infrastructure
Source: Own calculations using OECD CRS data.
34
Figure 4.7 Global Aid for Trade Flows 2008-2010: Regional Analysis
50,000
45,000
USD (millions)
40,000
35,000
30,000
2008
25,000
2009
20,000
2010
15,000
10,000
5,000
0
America
Africa
Oceania
Europe
Asia
Source: Own calculations using OECD CRS data.
35