WTO WORKSHOP ON RECENT ANALYSES OF THE DOHA ROUND The OECD Indicators on Trade Facilitation: What is the Impact of TF Measures on Trade Flows and Trade Costs ? WTO WORKSHOP ON RECENT ANALYSES OF THE DOHA ROUND Geneva, 2 November 2010

OECD measurements of trade facilitation costs and benefits A quantitative assessment of the benefits of trade facilitation, focussing on the distribution of gains among groups of countries An analysis of the costs of introducing and implementing TF measures, seeking to understand “the cost implications of proposed measures” in the future agreement Trade facilitation indicators, focussing on the impact of specific TF measures included in the draft agreement Benefits analysis– completed in 2003 Costs analysis – completed in 2006 Indicators - ongoing

TF indicators - a close connection to the WTO negotiations Following the structure of the Draft Consolidated Negotiating Text; Aiming to provide a basis for prioritizing trade facilitation actions by governments Helping mobilise technical assistance by donors in a targeted way.

Eleven Families of measures (plus one) Information availability Involvement of the trade community Advance rulings Appeal procedures Fees and charges Formalities – Documents Formalities – Automation Formalities – Procedures Internal Cooperation External Cooperation Consularization Governance and Impartiality* Difficult to catch « governance and impartiality », that’s why this component is taken apart.

Expanding coverage Currently including the 30 “old” OECD countries and Hong Kong, China Seeking to expand to recently acceded OECD countries, OECD’s “Enhanced Engagement” partners and any other country interested in participating, on a voluntary basis. Database and methodology adapted to developing country concerns Recent experts workshop with participation of several non-OECD delegates

Relative impact on trade flows These figures are the elasticities (the coefficients) of regression 3 of our gravity model. Only significant coefficients are reported here. They should be understood as follows : 1% variation of the indicator (a, b…) causes a x% increase of trade flows. Ex: 1% variation of TFI(a) brings a 0,664% increase in trade flows for manufactures. The gravity model follows the framework by Anderson and Van Wincoop (2003), integrating the « classical » values of a gravity model together with our indicator. In order to avoid problems of bias and loss of information, « zero trade » has been replaced by minimal values of 0,00000001.

Total Economy Same as previous slide but for total economy

Contribution to the reduction of costs Aggregate TFIs The decomposition of the variance illustrates the quantitative contribution of each factor (in%) in explaining the variation of trade costs. Methodology based on Fields (2003) and Chen and Novy (2009). Pmem Instead of collecting direct data on trade costs, trade costs inferred indirectly from trade data (using the gravity framework pioneered by Anderson and van Wincoop (2003) and applying it to industries with heterogeneous trade costs and heterogeneous elasticities of substitution). The model yields a micro-founded measure of bilateral trade integration that controls for time-varying multilateral resistance and that can be applied to disaggregated panel data. Results are based on Regression 4 with all indicators. Here Aggregate TFIs account for 9% of the variation of trade costs.  

Comparison to other variables TFIs composition Aggregate TFIs These results are quite significant, especially if viewed against estimates (Chen and Novy 2009) that improvements regarding technical barriers to trade taken as a whole would account for 4.5% of trade cost reductions. (However the specification is not the same, different variables are included in the regression) As a comparison, the “classical” control variables of the regressions account for 0.5% (languages), 2.7% (contiguity) and 8% (distance, which incorporates all transport costs) of cost reduction. Figures coming from Annex6, TableB, Manufacture.

Country, sector & trader diversity Welfare effects of trade facilitation (million USD and per cent of total) Uniformity Country, sector & trader diversity OECD-only World-wide welfare gains 38454 43259 14053 - due to direct cost reduction 6041 8250 2650 - due to indirect cost reduction 32413 35009 11402 OECD 69% 35% 103% OECD Asia-Pacific 8% 7% 22% OECD Europe 43% 17% 45% OECD North America 18% 11% 36% Non-OECD 31% 65% -3% Former Soviet Union 2% -1% Middle East & North Africa 5% 0% Latin America & Caribbean 13% Non-OECD Asia-Pacific 16% 24% Sub-saharan Africa Rest of World 1% Source: OECD Secretariat. Quick reminder of the 2003 benefits work based on an assumption of 1% trade costs reduction NOT 9% Effort to understand who would benefit, under what circumstances: Several scenarios tested, reflecting a hypothetical 1% reduction in worldwide TTCs : Uniformity scenario (TTCs assumed to fall by 1 % of the value of traded goods in all countries, sectors or types of traders Diversity scenario, More is done by those behind in order to “close the gap” to best practices by a common percentage Outcome : Under uniformity, 69% of gains accrue to OECD, Diversity leads to a marked shift of the benefits towards non-OECD countries (because they have more room to improve less efficient procedures, have larger share of SME traders and larger part of their trade in agro-food); So the benefits of trade facilitation accrue primarily to those countries that actively engage in it.

Thank you www.oecd.org/trade/facilitation evdokia.moise@oecd.org OECD Trade Policy Studies Overcoming Border Bottlenecks The Costs and Benefits of Trade Facilitation www.oecd.org/trade/facilitation evdokia.moise@oecd.org