Trade Costs and Facilitation: Data and Indicators to support action-oriented research

Transcription

1 Trade Costs and Facilitation: Data and Indicators to support action-oriented research Asia Pacific Public Sector Linkages Program May 17, 2012, Ho Chi Minh City, Vietnam John S. Wilson International Trade and Integration Unit Development Economics Research Group, World Bank 1

2 Overview Trade and the Global Economic Recovery Trade Facilitation and Supply Chain Performance World Bank Trade Assistance Strategy Operations and Research Data and Indicators Actionable Research Insights Transparency and intra-apec flows 2

3 Trade and the Global Economic Recovery Global trade growth in 2011 Q4 decelerated sharply Robust demand from developing countries key contributor to global trade growth 2012 Eurozone import demand decelerated at 30.1% (Jan 12) and 22.7% (Feb 12) Developing country demand accelerates above 30% (through Feb 2012) Source: World Bank Development Prospects Group. Developing Trends April

4 Trade Outlook in East Asia Despite growth from China, exporters in the Philippines, Malaysia, Indonesia, and Thailand and Vietnam are vulnerable to slowing import demand from OECD countries March 2012 China reports its biggest monthly trade deficit in a decade -6.9% = Export growth Jan-Feb (from year prior) 4

5 Trade and Economic Recovery Rebalancing global demand - key to sustained growth Implies Increase in net exports for country with large external deficits (e.g. US) Increase in domestic demand (imports) for countries with surpluses In the 28 countries with policy-induced surplus reversals over past 50 years, imports rose an average of 4.2 percentage points of GDP on average (IMF WEO 2012)

6 Along with Rebalancing must Cut Trade Costs High trade costs create thick borders Domestic barriers (corruption, etc) and external barriers Capacity Constraints Transparency

7 Why do Trade Costs Matter? Trade transaction costs considerable 1-15% of the value of traded goods (OECD) Cost to export in Sub-Saharan Africa = USD 2,492 per container; 1,106 USD in OECD countries (World Bank 2012) Reducing trade costs can produce substantial returns 1% increase in aid-for-trade facilitation = US $290 million in additional exports (Helble, Mann, Wilson 2011) Trade Facilitation Not just tariffs/quotas, but behind the border issues (Mann, Otsuke, Wilson 2004) Customs Environment Business Environment and regulation Transparency Harmonization of Standards Infrastructure 5% reduction will raise GDP by 0.9% (APEC) 7

8 World Bank Trade Strategy June In context of financial crisis and recognition of importance of trade to overall growth and development, World Bank releases first official trade strategy Four Pillars: 1. Trade Competitiveness and diversification 2. Trade facilitation, transport logistics, and trade finance 3. Support for market access and international trade cooperation 4. Managing external shock and promoting greater inclusion 8

9 World Bank Trade Assistance In FY 2011, the World Bank provided a total of US$2.6 billion in trade-related lending to help developing countries achieve their trade-reform objectives FY 2011 represents an almost five-fold increase from FY 2003 levels, when lending amounted to US$566 million Source: PREM-Trade, 2011.

10 World Bank Trade Lending Type of Activities funded by World Bank Trade-related Lending (FY 2010, Percentage of Total Lending) Technology Diffusion 3% Regional Integration 26% Trade Facilitation/ Market Access 42% Export Development and Competitivenes s 29% Source: PREM-Trade,

11 International Trade and Integration Team, Development Economics Research Group Mandate: Expand knowledge about the relationship between trade costs and private sector growth and export competitiveness Through Support for Data and Indicators Research and Relevant Policy Analysis Trade Facilitation Indicators, Trading Across Borders, Transparency Indicators Standards and Export Competitiveness, aid effectiveness, least developed countries

12 World Bank Trade Research Trade Facilitation been key focus of World Bank Research Group since 2002 Lowering trade costs and increasing transparency results in a significant increase in trade for even the poorest countries Improvements in infrastructure quality of Vietnam halfway to the level of Singapore, trade levels of the former would increase by 37.5 percent (Portugal-Perez, Wilson 2012) With limited resources in post-crisis context, targeted interventions are necessary to maximize effectiveness of aid measures 1% increase in aid to for trade facilitation results in an increase of $347 million in recipient countries exports (Helble, Mann, Wilson 2011); 12

13 Trade Facilitation Indicators

14 1. Portugal-Perez and Wilson 2012 Construct 4 composite indicators from 20+ single indicators using factor analysis Raw indicators from different sources (WEF, WB WDI, IT) grouped along four dimensions: 1. Port efficiency = quality of maritime and air ports infrastructure. 2. Customs environment = customs costs and administrative transparency of customs 3. Regulatory environment = the economy s approach to regulations. 4. IT sector infrastructure. Two Stages 1. Diagnostic Factor Analysis letting the variables gather in subgroups 2. Re-run FA procedure on sub-groups to estimate factors TF related indicators

15 Estimating the Indicators Hard Indicators Physical Infrastructure Soft Indicators Border and Transport Efficiency Quality of Ports Quality of Infrastructure Quality of Roads Quality of Railroads Number of documents to export Number of days to export Number of documents to import Number of days to import Information and Communications Technology (ICT) Business Environment Availability of latest ICT Technology Level of Technology Absorption Extent of Business Internet Use Government Prioritization Government Transparency Public Trust for Government Irregular payments in exports and imports Measures to combat corruption

16 1. Portugal-Perez and Wilson2012 Illustrative Simulations Using baseline gravity estimates, we provide counterfactual estimates of gains. 1. What is the impact on exports growth of improving indicators half the way to the level of the top performer in the region? 2. What is the equivalent tariff cut that increase exports by the same amount? ~ ad-valorem equivalent

17 Business Environment Improvement in Asia 16% Tariff cut equivalent rise in trade (improving half way to region average) 14% 12% 10% 8% 6% 4% 2% 0% Malaysia Thailand China Indonesia Philippines Vietnam Mongolia Portugal-Perez, A. & Wilson, S.J. Export Performance and Trade Facilitation: Hard and Soft Infrastructure. World Development (2012). 17

18 Singapore Australia Hong Kong SAR Japan Korea, Rep. Malaysia Thailand China Indonesia Vietnam Philippines Border & Transport Efficiency Improvement amongst APEC Economies Tariff cut equivalent and export growth equivalent (improving to top performing APEC Economy) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 18 Ad valorem Equivalent Tariff Export Growth

19 2. Trading Across Borders (Doing Business) 3 dimensions: Number of documents for export/import Costs of export/import procedures (only official costs) Time to export/import Source: Doing Business 2012, International Finance Corporation

20 Strength: 2. Trading Across Borders comparability standard container (drycargo, 20 foot, fullloaded) standard product (non hazardous, requiring neither refrigeration nor special standard (phytosanitary or safety) Source: Doing Business 2012, International Finance Corporation

21 3. Transparency Index Identifies links between transparency and trade facilitation Importer Transparency Index (ITI) and Exporter Transparency Index (ETI) Using factor analysis, transparency indicators drawing from a combination of: Doing Business Report (World Bank) Global Competitiveness Report (WEF) Logistics Perception Index (World Bank) MAcMap (ITC-CEPII) Global E-Government Readiness Report (UN)

22 Measuring Importer Transparency Importer Transparency Index (ITI) Predictability Simplification Customs Administration: Time Spread Imports Std. Dev. Irreg. Pay. Favoritism Trade Policy: Bound Lines Tariff Dispersion Hidden Barriers E-Readiness Customs Admin.: Clearance Time Imports No. Agencies Imports No. Documents Imports Irreg. Payments 22

23 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?

24 Transparency and Intra-APEC Trade Flows To assess the impact of transparency on trade, we use a standard gravity model Bilateral tariff rates, including regional agreements and preferences Ad valorem equivalents of non-tariff measures Take account of reverse causality The Bank s econometric results suggest that: Improvements to transparency, tariffs, and NTMs all have the potential to boost trade 24

25 Percent of Baseline Scenario I Results: +$148bn (7.5%) AUS CAN CHL CHN HKG IDN JPN KOR MEX MYS NZL PER PHL RUS SGP THA USA VNM Imports Exports Scenario I: Improve importer transparency within the APEC region such that no economy is below the current regional average (0.54). 25

26 Summary Data and indicators crucial to providing empirical analysis needed to assess supply chain connectivity issues Key Examples: Portugal-Perez & Wilson 2012, Trading Across Borders, and Transparency Index Simulations demonstrate crucial gains to trade associated with transparency and trade policy reform Looking forward: customs data, firm-level data, evaluation of trade-related, impact of standards on competitiveness 26

27 Thank You John S. Wilson Lead Economist Development Economics Research Group Trade and International Integration The World Bank 1818 H Street, N.W. Mail Stop MC3-303 Washington, D.C Phone: 1 (202)