Trade Facilitation Data day Alberto PORTUGAL-PEREZ The World

Trade Facilitation Data day Alberto PORTUGAL-PEREZ The World Bank

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

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

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

Data bases presented here: 1. 2. 3. 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.

i. Trading across the borders (DB) (1/2) q q q 3 dimensions: n Number of documents for export/import n Costs of export/import procedures (only official costs) n 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: n Single type of container and type of product.

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

ii. Logistic Performance Index (LPI) (1/3) q Survey data on seven logistics dimensions: 1. 2. 3. 4. 5. 6. 7. 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)

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

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

Containerization in Newark-NJ, US

Containerization: Conakry, Guinea

iii. TF Indicators (Wilson et al) (1/2) q 1. 2. 3. 4. 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.

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

Some Policy and Research Questions n n n What is the impact of Trade Facilitation measures on trade costs, and thus trade? q across countries, regions? q 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?

Some examples of research findings (1/2) Using DB, LPI and TF(W+) data: n Reducing a day of delay in shipping increases trade by 1 percent + equivalent to 70 km. (Djankov, Freund and Pham, forthcoming). n n n 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)).

Some examples of research findings (2/2) Using other data: n Improving port efficiency from the 25 th to the 75 th percentile in Latin American ports reduces shipping costs to the US by 12% (Clark, Dollar and Micco 2004) n Port congestion in East Asia raises trade costs. A 10% increase in port capacity lowers costs by 9%. (Abe and Wilson (2009). n n 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).

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