The topic of trade facilitation is a new discipline that started with the age of globalization. Trade between countries has raised important issues like how to harmonize it, make it faster and easier. That is why many organizations like the WTO or the OECD have started their research on the matter from the beginning of the 21st century. However, there is not much of the research or the data available for the discipline compared to other branches of the economy. The author of the thesis has tried to find and collect all the necessary publications of the relevant topics in this chapter and described the works. Mainly, the OECD along with the World Bank and the WTO/WCO were involved in conducting different research. Evdokia Moise, Thomas Orliac, and Peter Minor wrote the first work that the author considers. It was published within the OECD Open Source Library under the working paper 118 in 2011. The report shows the results of the OECD Trade Facilitation Indicators (TFI’s) for evaluating the economic and trade impact of specific TFI’s. There were twelve TFI’s used in the report that are most relevant to the WTO member states’ negotiations to accept. The work showed how certain TFI’s affect the trade of particular countries. There are several indicators particularly important and have the greatest impact on the OECD countries. Those indicators are advance rulings, information availability, formalities and procedures and inter-agency cooperation. According to a paper, if all TFIs are added their cost reduction can reach almost 10% of trade costs. It presents findings designed to develop indicators for assessing the economic and trade impact of specific trade facilitation measures. In particular, twelve TFI’s were introduced in the work, corresponding to the main policy areas under negotiation at the WTO. For this report, the relationship of the TFIs to trade patterns and trade costs was studied. The analysis showed that the TFIs could be used in order to identify which areas contribute the most to increases in trade and the greatest reductions in trade costs. The Trade Facilitation Indicators are consistent with the twelve articles of the WTO Draft Consolidated Negotiating Text on trade facilitation (DCNT), corresponding to twelve large categories of measures included in the negotiations. These twelve indicators were composed of ninety-eight variables in the paper, whose values are taken from questionnaire replies as well as publicly available data that the authors of the research describe in the data collection section. The relationships between variables in each category were analyzed to identify logical links and different rankings according to their importance were given to each of the countries. Country scores showed that the overall performance within each indicator is determined by critical variables, where the working paper indicates the most important disparities between top and bottom performers. These critical variables include information on appeal procedures, advance rulings and penalty provisions for the indicator information availability; and single windows, pre-arrival processing and authorized traders for the indicator covering the simplification of formalities and procedures. Other variables, such as acceptance of commercial documents and authenticated copies for the indicator covering simplification of documents, or cross-border agency agreements for the indicator external co-operation were homogeneous according to the paper, as all countries in the sample had achieved top performance in these areas. On the other hand, it was expected that they would present more significant performance disparities in a sample including emerging and other developing countries, but it was not confirmed in the results of the work. When it comes to identifying the policy areas that lead to the highest increases in trade flows, the most significant trade facilitation measure was the indicator of advance rulings. Other measures significantly contributing to an increase in trade flows are information availability, streamlining of fees and charges, harmonization and simplification of documents, and co-operation between border agencies within the country (internal) and with neighboring countries (external). Sector specific analysis that was a major part of the work showed that these indicators were significant for manufactured goods, but less significant for agricultural goods. This is mainly due to the poor reply rate on variables accounting for agricultural goods. On the other hand, increases in agricultural goods trade seemed to be particularly linked to improvements in formalities and procedures. When it comes to identifying the policy areas that could help achieve the most significant reductions in trade costs, measures to streamline procedures and advance rulings were the greatest contributors: the first had the potential of reducing trade costs by 5.4% and the second by 3.7%. Other measures that had an important cost reduction potential according to the researchers were automation (2.7% in total), and measures to streamline fees and charges (1.7%). These were quite significant savings taking into account that similar studies had estimated that improvements on the technical barriers to trade taken as a whole could account for 4.5% of trade cost reductions. The scientists pointed out that if all the TFIs are added together, their cost reduction potential could potentially reach almost 10% of trade costs. This number is consistent with several other studies on the overall impact of trade facilitation on trade costs that the author of this thesis considers in his work. Finally, the paper stresses the importance on the use of individual trade facilitation indicators as a tool to allow countries to better assess what trade facilitation dimensions deserve priority and should be developed. The authors mentioned future steps in the work that could include refining the analysis in a more sector-specific, firm-specific manner, and
expanding the analysis to cover countries outside the OECD area, including emerging and other developing countries.
The second work that the author of the thesis takes into consideration is again the working paper of the OECD Trade Policy. E. Moise and Silvia Sorescu are the authors of the working paper 144. It was written in 2013 and focused on the potential impact of trade facilitation on developing countries’ trade. Unlike the first paper where only twelve indicators were considered, here the researchers used sixteen indicators that affect the overall trade performance of each developing country. It looks on how particular TFI’s affect certain country and in what amount. According to the report, the indicators that affect the trade in a most substantial way are the availability of trade-related information, the simplification and harmonization of documents, the streamlining of procedures and the use of automated processes. Interestingly, the combined effect of the simultaneous improvement in all the TFI’s is greater than just a simple summation of all the individual country specific TFI’s. According to the results, the total trade cost reduction for the low-income countries (LIC) is 14.5%, for lower-middle income countries (LMIC) it is 15.5%, and 13.2% for upper-middle income countries (UMIC) . The following paper presented findings from the OECD analysis of indicators for assessing the relative economic and trade impact of specific trade facilitation measures on 107 countries at three stages of development. The firstly mentioned work produced estimates of the trade impact of trade facilitation measures for OECD countries (OECD Trade Policy Paper no.118) showing that trade facilitation measures had the potential to reduce overall trade costs by almost 10%. The purpose of the current estimation was to understand the economic importance and relevance of trade facilitation measures and to provide a basis for prioritizing trade facilitation actions by governments and mobilizing technical assistance and capacity building efforts for developing countries in a more targeted way. Sixteen trade facilitation indicators had been used, again corresponding to the same main policy areas under negotiation at the WTO, in order to estimate the impact of those policy areas on trade volumes and trade costs in all WTO member countries and observers. This was the main difference between the first and the second papers. In the first one, only OECD member states were considered and twelve indicators used, while here the researchers used sixteen. According to the authors, these sixteen indicators were composed of 97 variables, whose values are taken from publicly available data and subsequently fact-checked with concerned governments. Of the 107 countries included in the study, 96 are WTO members and 11 – WTO observers. The coverage was wide, including 21 low income, 32 lower-middle income, 39 upper-middle income and 15 high-income countries. When it came to the differences in income, geography and level of development, which could have resulted in differing outcomes to the impact of trade facilitation measures, the assessment considered several groups of countries defined based on income, geographic and economic partnership criteria. The econometric analysis in the work revealed that enhancing trade facilitation had a positive impact on trade flows. The authors also found that the most significant trade facilitation measures, those that have the highest impact on trade volumes, are information availability, harmonization and simplification of documents, automated processes and risk management, streamlining of border procedures and good governance and impartiality. Sector specific analysis that was also conducted based on the first paper showed that these indicators were significant for manufactured goods but results were less consistent across groups for agricultural goods. The last conclusion came from the fact that there was a poor data availability on variables for specificities of agricultural goods. For low-income countries, the trade facilitation area that led to the most significant increases in trade flows is the harmonization and simplification of documents. The same outcome applied to the Sub-Saharan African group of countries. For lower-middle and upper-middle income countries the strongest impact came from the streamlining of procedures, the same applied for the Asia, Latin America and Caribbean, Eastern Europe and Central Asian groups of countries. The impact of the TFI’s was significant not only in specifications on developing countries as importers, but also in the same way when developing countries were exporting to the rest of the countries, developing and developed economies, in the overall model. Improving the efficiency of export procedures and addressing border obstacles on the export side were also pointed out as important components of trade facilitation measures. This result confirmed that improvements in the trade facilitation environment of developing countries were essential for increasing their export performance. On the overall trade costs, authors implied that measures to harmonize and simplify documents and the use of automated processes had had the greatest contribution for low-income countries: the first one had the potential of reducing trade costs by approximately 3% and the second by 2.3%. For lower-middle income countries the harmonization and simplification of documents could potentially reduce costs by 2.7% and the streamlining of procedures by 2.2%, while for upper-middle income countries the streamlining of procedures could bring cost reductions of 2.8% and the use of automated processes and risk management another 2.4%. Lastly, the research showed that if all the TFIs were added within the same regression, their cost reduction potential would reach almost 14.5% of the total costs for low-income countries, 15.5% for lower middle-income countries and 13.2% in the case of upper middle-income countries. The combined effect of trade facilitation improvements would be greater than the simple sum of the impact of individual measures. It confirmed the importance of undertaking trade facilitation reform in a comprehensive manner rather than simply focusing on isolated measures. The use of individual trade facilitation indicators could have enabled countries to better assess which trade facilitation dimensions deserve priority.