Landlocked or Policy Locked? How Services Trade Protection Deepens Economic Isolation
Borchert, Ingo, B. Gootiiz, A. Grover and A. Mattoo, January 2012. World Bank Policy Research Working Paper 5942.
A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are significantly more restrictive in landlocked countries than elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. This paper finds evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Even moderate liberalization in these sectors could lead to an increase of cellular subscriptions by 7 percentage points and a 20-percent increase in the number of flights. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence, "trade-facilitating" investments under various "aid-for-trade" initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.
Why Does Cargo Spend Weeks in African Ports? The Case of Douala, Cameroon
Salim Refas, and Thomas Cantens, February 2011. World Bank Working Paper.
This paper investigates the main factors explaining long container dwell times in African Ports. Using original and extensive data on container imports in the Port of Douala, it seeks to provide a basic understanding of why containers stay on average more than two weeks in gateway ports in Africa while long dwell times are widely recognized as a critical hindrance to economic development. It also demonstrates the interrelationships that exist between logistics performance of consignees, operational performance of port operators and efficiency of customs clearance operations. Shipment level analysis is used to identify the main determinants of long cargo dwell times and the impact of shipment characteristics such as fiscal regime, density of value, bulking and packaging type, last port of call, and region of origin or commodity group on cargo dwell time in ports is tested. External factors, such as performance of clearing and forwarding agents, shippers and shipping line strategies, also play an important role in the determination of long dwell times. Cargo dwell time distribution has many specificities, including broad-tail, high variance or right-censoring, which requires in-depth statistical analysis prior to any design of policy recommendations.
Mariana Vijil, Laurent Wagner, October 2010. UMR INRA, UR INRA.
The authors argue that there a few empirical studies assessing the effectiveness of aid for trade on trade performance and that existing works do not test channels by which this impact is transiting. They address this question using an empirical analysis constructed in two steps. Following a model of export performance, they first test if institutions and infrastructure, their two potential channels of transmission, are indeed determinants of export performance. Secondly, they test the impact of aid for trade sectoral flows on the determinants that were highlighted in the first part. They show that the infrastructure channel appears to be highly significant in the first step whereas the institutional one turns out to have limited impact on developing countries’ exports. Furthermore, in the second step, aid for infrastructure seems, once instrumented, to have a strong and positive impact on the infrastructure level. The results indicate that a 10 per cent increase in aid to infrastructure commitments per capita leads to an average increase of the exports over GDP ratio for a developing country of 2.34 per cent. It is also equivalent to a 2.71 per cent reduction of the tariff and non-tariff barriers.
Paras Khare, and Anil Belbase, September 2010. ARTNeT Working Paper Series, No. 84.
This study empirically investigates how the quality of trade facilitation (both on-the border and behind-the-border factors) in landlocked developing countries (LLDCs) and in their transit countries impacts LLDC trade. The main contribution of this study is the consideration of trade facilitation environment in both LLDCs and transit countries. In the area of exports, an important policy implication flowing from the results of the study is that international assistance for improving the trade performance of LLDCs, as envisaged by the Almaty Programme of Action, endorsed by the United Nations General Assembly, should focus on improving the trade facilitation environment in both the LLDCs and their transit neighbours. In the area of imports, the policy implication is that LLDCs should rationalize their tariff structures, which will help bring about a more efficient resource allocation, leading to increased specialization and export competitiveness.
Matthias Busse, Ruth Hoekstra, Jens Koeniger, September 2010. SSRN Working Paper.
There have been ongoing discussions within the WTO Doha Round on Trade Facilitation and the wider Aid for Trade agenda to assist developing countries in reducing behind-the-border restrictions and to help them benefit from trade reform. The paper contributes to this debate by analyzing the impact of foreign aid spent on Aid for Trade and Trade Facilitation on the costs of trading. The authors conduct a panel data estimation for a sample of 99 developing countries for the period 2004-2009. Overall, the study finds that aid measures have a negative effect on the costs of trading.
Bernard Hoekman, and John S. Wilson, July 2010. World Bank.
Since 2005, donors and development agencies have increased the overall value of aid for trade and put in place several mechanisms to channel such aid and to ensure that it targets national priorities. This paper reviews recent trends in the allocation of aid for trade and analyses of its effectiveness. It identifies a number of opportunities for concerted action to enhance the impact of aid for trade initiatives, including greater involvement by middle-income countries in the initiative (through improved market access, investment flows, and knowledge transfers); deeper engagement with the private sector—a key source of information on what works and what does not; a stronger focus on improving the “behind the border” policies that affect the efficiency of key services sectors and help determine firm-level competitiveness; and a stronger focus on monitoring and evaluation of results.
Joel Hernandez, and Angelo B. Taningco, May 2010. ARTNeT Working Paper Series, No. 80.
In this paper, the authors observe that the recent trends on trade-related documentary requirements, trading time, cost to trade, quality of physical infrastructure—including airports, ports, railroads, etc., telecommunications services, accessibility to finance, and contract enforcement procedures, appear to be mixed across East Asian economies and over time. Using a standard gravity model and bilateral trade data at the Broad Economic Categories (BEC) 1-digitproduct classification, the authors find that, overall, bilateral trade in East Asia is influenced by time delays in trade, quality of port infrastructure, telecommunications services, and depth of credit information.
Alberto Portugal-Perez, and John S. Wilson, April 2010. World Bank Policy Research Working Paper 5261.
The authors estimate the impact of aggregate indicators of “soft” and “hard” infrastructure on the export performance of developing countries. They build four new indicators for 101 countries over the period 2004- 07. 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. Moreover, the findings provide evidence that the marginal effect of infrastructure improvement on exports appears to be decreasing in per capita income. In contrast, the impact of information and communications technology on exports appears increasingly important for richer countries. Drawing on estimates, the authors compute illustrative exports growth for developing countries and ad-valorem equivalents of improving each indicator halfway to the level of the top performer in the region.
Pushpa Raj Rajkarnikar, April 2010. ARTNeT Working Paper Series, No. 79.
This study examines the adequacy and effectiveness of delivery of logistic services and their implication for export performance of Nepal. It provides a detailed assessment of the current trade facilitation and logistics situation in Nepal, including on transportation, storage and handling services. The results of an exploratory survey of freight forwarders and exporters conducted as part of the study indicate low level of efficiency of logistics in Nepal. This is consistent with benchmark indicators available from global databases (e.g., Logistic Performance Index, Doing Business indicators). Compared to India and Bangladesh cost of inland transport and handling is remarkably high in Nepal as substantial cost are involved in transit transportation to the sea port. Thus Nepalese exports are less cost efficient as compared to main competitors. Frequent landslides and congestion in some sections of road corridors, frequent strikes and road blocked, insecurity, illegal octroi and syndication among truck owners are the major logistic problems being faced by Nepalese exporters within the country. Bad road conditions in certain sections of transit corridor and port congestion are the major problems in the transit country. Need of transshipment from feeder vessel to mother vessel and insurance against deflection are other problems incurring extra costs on exports.
Pablo Guerrero, Krista Lucenti, and Sebastián Galarza S., December 2009. Inter-American Development Bank.
During the past few decades, the landscape of the world economy has changed. New trade patterns reflect the globalization of the supply chain and intra-industry trade, and increasing flows between neighboring countries and trading blocs with similar factor endowments. Similarly, the approach to production, trade, and transportation has evolved incorporating freight logistics as an important value-added service in the global production. This integrated approach have become essential, and as such, both the trade agenda and freight logistics are beginning to converge providing an unparalleled opportunity for countries to deepen their integration with neighboring countries and their national performance for transport related services. Consequently, developing countries are finding themselves hard-pressed to adjust their policy agendas to take into account costs not covered in past rounds of trade negotiations. This paper focuses on the importance of freight logistics in trade facilitation measures, examines the transport and logistics cost in international trade, addresses the logistics performance in Latin America and the Caribbean and the regional initiatives to advance the integration process and finally exchanges views on the future of trade logistics and the regional agenda to deepen integration.
Jane Korinek, and Patricia Sourdin, September 2009. OECD Trade Policy Working Paper No. 92.
Maritime transport costs have a significant impact on the trade in agricultural goods. Maritime transport costs represent a high proportion of the imported value of agricultural products – 10% on average, which is a similar level of magnitude as agricultural tariffs. This study shows that a doubling in the cost of shipping is associated with a 42% drop in trade on average in agricultural goods overall. The tendency to source imports from countries with low transport costs is therefore strong. Trade in some products is particularly affected by changes in maritime transport costs, in particular cereals and oilseeds, which are shipped in bulk. Time spent in transit also has a strong effect on trade: an extra day spent at sea on an average sea voyage of 20 days implies a 4.5% drop in trade between a given pair of trading partners. Not only cost but also efficiency in getting agricultural goods to market are therefore important factors in explaining trade flows.
Yue Li, and John S. Wilson, June 2009. ARTNeT Working Paper Series, No. 71.
Existing empirical studies on trade costs and trade facilitation largely focus on aggregate impacts of reform due to data availability. The authors of the study take a step toward filling in this gap in literature. Using the World Bank Enterprises Surveys, the study extends the scope of empirical literature to firm dimension with a focus on SMEs. For Asia countries, they find that improvement in trade facilitation indicators tend to increase the probability that SMEs will become exporter -- as well as their export propensity. In particular, increasing policy predictability and enhancing information technology services are the most effective measures for SMEs in expanding trade. The authors also find that SMEs are less responsive to improvement in transportation infrastructure, overall, than large enterprises while increasing policy predictability matters more to SMEs. In summary, in order to expand the benefits of trade to SMEs, countries need to make more substantial investments in reform – in particular in the “soft” part of trade facilitation.
Julio A. Gonzalez, Jose Luis Guasch, and Tomas Serebrisky, March 2008. Work Bank Policy Research Working Paper 4558.
Access to basic infrastructure services – roads, electricity, water, sanitation – and the efficient provision of the services, is a key challenge in the fight against poverty. Many of the poor (and particularly the extreme poor) in rural communities in Latin America live on average 5 kilometres or more from the nearest paved road, which is almost twice as far as non-poor rural households. There have been major improvements in access to water, sanitation, electricity, telecommunications, ports, and airports, but road coverage has not changed much, although some effort and resources have been invested to improve the quality of road networks. This paper focuses on the main determinants of logistics costs and physical access to services and, whenever possible, provides evidence of the effects of these determinants on competitiveness, growth, and poverty in Latin American economies. The analysis shows the impact of improving infrastructure and logistics costs on three fronts – macro (growth), micro (productivity at the firm level), and poverty (the earnings of poor/rural people). In addition, the paper provides recommendations and solutions that encompass a series of policies to reduce the prevalent high logistics costs and limited access to services in Latin America. The recommendations rely on applied economic analysis on logistics and trade facilitation.
Gaël Raballand, Charles Kunaka, and Bo Giersing, January 2008. World Bank. Policy Research Working Paper No. 4482.
This paper argues that regional liberalization of trucking services has had an important effect on transport costs and tariffs for Zambia's economy. Zambia is a peculiar example in Southern Africa as it benefits from relatively low transport costs compared with other landlocked countries in Africa. This is mainly because of competition between Zambian and other regional, mainly South African, operators and because of South African investments in Zambia's trucking industry. As a result, the costs of operators registered in Zambia and South Africa are similar. The study also demonstrates that enhancing trucking interoperability in Southern Africa would significantly impact positively the Zambian trucking industry's competitiveness. The main measures to significantly increase trucking competitiveness in the region would more likely derive from reducing fuel costs in Zambia, improving border-post operations, and relaxing South African truck import rules.
Using data on bribes collected from truckers, this work analyzes the organization and conduct of petty corruption on West Africa’s highways. The analysis builds a model of the determinants of bribes paid and estimates it with data from over 900 trucks, which together were stopped over 25,000 times along three key trucking corridors. The empirical results show that petty corruption on the major truck routes of West Africa is widespread, pervasive, and intransigent. They point to an entrenched corruption mechanism, one that varies across countries and checkpoint types, but preys on trucks and drivers of all types.
J. Michael Finger, and John S. Wilson, August 2006. World Bank Policy Research Working Paper 3971.
Contrary to the prevailing view that the Doha negotiations have achieved little, the authors find that on trade facilitation much progress has been made. This is particularly true in regard to action by development banks and bilateral development agencies to meet client demand for assistance in reform. Active private sector participation has been an important factor driving change. Many agencies have been involved in this work; the authors find that their roles have been consistent with their comparative advantages. As to how the international community can best support continued progress, the authors conclude in favour of a cautious approach to the imposition of new WTO obligations in the area of trade facilitation. On the whole, this is the approach the WTO has taken, e.g., by limiting its negotiations on trade facilitation to several specific provisions of the GATT. The WTO can continue to function as a catalyst for reform; it is perhaps uniquely placed to relate the trade facilitation agenda to the overall trade agenda. On design and construction of the relevant infrastructures and capacities to spur development, the development institutions, including bilateral agencies, should continue to lead. The authors find little evidence to support the need for a comprehensive new “platform” or mechanism to channel trade-related aid as part of implementation of any new agreement at the WTO on trade facilitation. They recommend, however, that an innovative approach to using the well established, but under utilized Trade Policy Review Mechanism be considered to increase transparency on where new aid is going over time and to expand understanding of where and how country-based progress has been achieved.
Evdokia Moïsé, March 2006. OECD Trade Policy Working Paper, No. 32.
Annex D of the July 2004 Decision of the WTO General Council indicates that "the principle (of special and differential treatment for developing and least-developed countries) should extend beyond the granting of traditional transition periods for implementing commitments. In particular, the extent and the timing of entering into commitments shall be related to the implementation capacities of developing and least-developed Members." The objective of this study is to offer reflections on how special and differential treatment for trade facilitation may be shaped by the cost implications of measures included in the future agreement. It is based on findings of OECD work on the costs of trade facilitation measures, which confirms that different countries - even at an equivalent level of development - face different situations and present differing implementation capacities, and points to the relative complexity of implementation of the different measures proposed for inclusion in a future trade facilitation agreement.
Last updated: March 2012
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