Trade facilitation and customs valuation

After a decade of negotiations and additional preparatory work the WTO Trade Facilitation Agreement (TFA) is poised to enter into force. It promises to streamline and substantially prune the red tape that all too often slows and impedes international commerce - thereby significantly reducing both cost and time needed to do business across borders. The paper chronicles the path from the conclusion of the talks at the 2013 Bali Ministerial Conference to the present day as we prepare for the Agreement to take effect. It reviews the state of the ratification process analyses implementation schedules and outlines work still to be done. The study shows that the emerging application of the TFA like its negotiation has once again confounded the sceptics – who first doubted that a TF Agreement would see the light of day and then questioned if it would ever be put into practice. While plenty remains to be done to implement the TFA across the full WTO membership its entry into force is set to happen – a valedictory moment.

We estimate the effects of trade facilitation on the extensive margins of trade. Using OECD Trade Facilitation Indicators – which closely reflect the Trade Facilitation Agreement negotiated at the Bali WTO Ministerial Conference of December 2013 – we show that trade facilitation in a given exporting country is positively correlated with the number of products exported by destination and with the number of export destinations served by product. To address the issue of causality we employ an identification strategy whereby only exports of new products or exports to new destinations are taken into account when computing the respective margins of trade. Our findings therefore imply a positive causal impact of trade facilitation on the extensive margins of trade. The results are to a large extent robust to alternative definitions of extensive margins to different sets of controls variables and to various estimation methods. Simulating the effect of an increase to the regional or global median values of trade facilitation we are able to quantify the potential extensive margin gains of trade facilitation reform in different regions.

It has become increasingly common to produce goods in a number of geographically dispersed stages linked by international trade. This tendency known by names such as “production fragmentation” “processing trade” and “vertical specialization” has important implications for the analysis of non-tariff measures (NTMs) and trade facilitation. First different types of NTMs or trade facilitation issues are naturally associated with different stages in the movement of goods. Different price gaps can be assigned to these stages making it possible to decompose the overall amount of distortion and to prioritize the policies with the largest potential efficiency gains. Second NTMs may accumulate in long supply chains implying that their trade-distorting effects are greater for goods produced in a fragmented manner than for goods with simple production processes. There is evidence that trade costs are more important for high technology goods or goods undergoing several stages of processing. Issues with product standards may be particularly important for goods with long supply chains. The link between NTMs and supply chains also has implications for economic development and for the relationship between liberalization in services and goods.

This paper assesses the impact of the 2005 multilateral Hong Kong Ministerial decision on duty free quota free (DFQF) market access for products originating in Least developed countries (LDCs) on the latter's export performance. The analysis is conducted over a sample of 41 LDCs with data spanning the period 1998-2013. The empirical analysis examines both the average effect and the short term/medium term effect. Results indicate that on average this multilateral decision has exerted a positive effect on LDCs' performance on merchandise exports with this average positive effect being solely driven by a positive effect on LDCs' export performance on primary products; the average effect on manufacturing exports has been statistically nil. In the short and medium term this decision has exerted a positive effect on LDCs' merchandise export performance as well as on the components of the latter namely both primary product exports and manufacturing exports. However the positive effect on primary product exports appears to be far higher than that on manufacturing exports. These findings have important policy implications regarding reflections on the way LDCs could utilize their policy flexibilities in the WTO Agreements to diversify their exports away from the primary sector and toward manufacturing and/or services sector.

The paper chronicles the negotiating history of the recently concluded Trade Facilitation Accord. Analysing the various stages of the decade-long effort to get the Agreement off the ground it examines what was at stake in the negotiations how they evolved and why they finally succeeded - despite many obstacles and detours along the way. The study also suggests ways in which the exercise has broken new ground – for Trade Facilitation rule-making at the global level for how WTO Members negotiate agreements and for the world trading system as a whole.

This paper reviews the main developments of trade and related policies and measures in the Asia and Pacific region during the 30 years since establishment in 1989 of the Trade Policy Review Mechanism (TPRM). The objectives of the TPRM include facilitating the smooth functioning of the multilateral trading system by enhancing the transparency of WTO Members' trade policies.