Trade Facilitation Data day

1. Trade FacilitationData day Alberto PORTUGAL-PEREZ The World Bank

2. What is Trade Facilitation (TF)? • No standard definition: • OECD : “Simplification and standardization of procedures and associated information flows required to move goods internationally...” • WTO : “Wide range of activities aiming at removing obstacles to the movement of goods across borders ..(e.g. simplification of customs procedures)” • In a broader sense: Trade facilitation = any policy aimed at reducing trade costs several dimensions.

3. Dimensions of TF-related data • “Hard” infrastructure vs. “soft” infrastructure • Survey data vs. “harder” data (km paved roads, railway, etc.) • Country level vs. more disaggregated (ports, roads, networks, etc.) • Road – rail infrastructure • Ports infrastructure • Airports • Multimodal networks. • Customs environment • Transparency and corruption • Regulatory environment

4. Dimensions of TF-related data Example of disaggregated data: Check points, bribes and delays  Rent-seeking behavior can increase trade costs.

5. Data bases presented here: • Trading across the borders (Doing Business) • Logistic Performance Index (LPI) • Trade Facilitation Indicators (Wilson et al) country level data good coverage NB: other data sets have country level TF-related variables. Ex: WDI: % paved roads, km railroads, # telephone lines, etc.

6. i. Trading across the borders (DB) (1/2) • 3 dimensions: • Number of documents for export/import • Costs of export/import procedures (only official costs) • Time to export/import • Strongest point: comparability. • standard container (dry-cargo, 20 foot, full-loaded) • standard product (non hazardous, requiring neither refrigeration nor special standard (phitosanitary or safety)) • Limitation: • Single type of container and type of product.

7. i. Trading across the borders (DB) (2/2) Costs of export procedures in SSA

8. ii. Logistic Performance Index (LPI) (1/3) • Survey data on seven logistics dimensions: • Efficiency of customs clearance. • Quality of transport and IT infrastructure. • Ease and affordability of arranging intl. shipments • Competence of the local logistics industry • Ability to track/trace intl. shipments. • Domestic logistics costs. • Timeliness of shipments in reaching destinations.  LPI on a 1 (worst) to 5 (best) scale is aggregated by statistic techniques (PCA)

9. ii. Logistic Performance Index (LPI) (2/3)

10. ii. Logistic Performance Index (LPI) (3/3) • Strong points: • Survey: Professionals from international logistics companies working with several countries. • Web survey: costs are reduced. • Limitations: • Only survey data (1-5 scale questionnaire)

11. Containerization in Newark-NJ, US

12. Containerization: Conakry, Guinea

13. iii. TF Indicators (Wilson et al) (1/2) • Raw indicators from different sources (WEF, WB WDI, IT) grouped along four dimensions: • Port efficiency = quality of maritime and air ports infrastructure. • Customs environment = customs costs and administrative transparency of customs • Regulatory environment = the economy’s approach to regulations. • IT sector infrastructure.

14. iii. TF Indicators (Wilson et al) (2/2) • Strong points: • Considers different sources: survey data and hard data. • Summarizes several indicators on well-defined dimensions. • Limitations: • Old indicators….but being updated • Simple average of single indicators….but currently exploring different statistical methods to aggregate them (principal components and factor analysis)

15. Some Policy and Research Questions • What is the impact of Trade Facilitation measures on trade costs, and thus trade? • across countries, regions? • compared to other barriers to trade (e.g. tariffs)? • How important are gains in trade from decline in administrative costs compared to investment in “hard” infrastructure? and across policies (investment, regulatory reform, simplification, etc.)? • What measures (investment, reform) to prioritize? and where?

16. Some examples of research findings (1/2) Using DB, LPI and TF(W+) data: • Reducing a day of delay in shipping increases trade by 1 percent + equivalent to 70 km. (Djankov, Freund and Pham, forthcoming). • If Ethiopia improves logistics half-way to Mauritius’ level, exports would grow as if 7.6% cut in tariffs faced by Ethiopian exporters. (Portugal-Perez and Wilson, forthcoming). • Trade facilitation is likely to increase the positive trade impacts of lowering remaining border barriers by a factor of two or more (Hoekman and Nicita 2009) • Controlling for typical determinants, a reduction of trade costs associated with an increase in OECD FDI to developing countries (Portugal-Perez and Wilson (2009)).

17. Some examples of research findings (2/2) Using other data: • Improving port efficiency from the 25th to the 75th percentile in Latin American ports reduces shipping costs to the US by 12% (Clark, Dollar and Micco 2004) • Port congestion in East Asia raises trade costs. A 10% increase in port capacity lowers costs by 9%. (Abe and Wilson (2009). • Eliminating market power in shipping would increase trade by 5-15 %(Hummels, Lugovskyy and Skiba, forthcoming). • Improved roads in Eastern Europe and Central Asia could expand trade by 50% (Shepherd and Wilson 2007).

18. The way ahead • Dream data base? Depending on the research/policy question and level of analysis. Costs/Benefits. Ex: • What is the impact of trade facilitation at the firm level? Which sectors or type of firms will benefit more? • Country level data: use of time-series data. Most analysis has been in cross section. • Research focused on benefits of improved trade facilitation, what about the costs? • How expensive are improved customs, roads etc? • What are the political costs of reform aiming at reducing administrative costs?