Download Quantifying the Benefits of Trade Facilitation in North-East Asia Region

Quantifying the Benefits of Trade
Facilitation in North-East Asia Region
North-East Asia Forum on Trade Facilitation
Tsunehiro Otsuki, Osaka University
Yejin Ha, UNESCAP East and North-East Asia Office
Background
Ø
Rapid yet uneven economic growth within countries of
the Greater Tumen Region (China, Mongolia, RoK,
Russian Federation)
Ø
Following 2009 global economic crisis, mounting
economic challenges requiring the region to develop a
new way of doing business and new growth poles
Ø
Member Countries of GTI and UNESCAP-ENEA
recognize:
i.
trade facilitation is a key means to increase trade flows
ii. huge growth potential of GTR
iii. but no systematic study on current status of trade and trade
facilitation of GTR
Total trade of NEA countries
Million USD
Source: Author’s calculation based on UN Comtrade database
Key Issues
ØDefinition and scope of trade facilitation are not clear
ØBenefits of trade facilitation are unknown to potential
participants
ØCapacity development goals may be improperly prioritized
Challenges in Measuring Effect
Ø
Measuring trade facilitation
– Not just about transport cost, or customs clearance, or
inventory, or communications, or standards, but all of
these.
Ø
Choosing a methodology
– Needs to be broad-based for many economies
– CGE vs. econometric
Ø
Designing a scenario to gauge benefits
– One-size fits all vs. scaled changes for different
economies
Trade Facilitation:
Areas of Focus in Existing Empirical Works
Ø
Transports
– UNCTAD (2001), APEC (1999),
Fink, Mattoo, Neagu (2002)
Ø
Customs
– Hummels (2001)
Ø
Information technology infrastructure
– Freund and Weinhold (2000), Hertel, Walmsley and
Itakura (2001)
Ø
Multi-dimensional approach
– Wilson, Mann, Otsuki (2005), Otsuki (2011)
Measuring Trade Facilitation:
Definition
Ø
Simplification & harmonization of trade
procedures through:
– Reduced transport costs
– Improved ports facilities
– Efficient and modern customs regimes
– Transparent and harmonized regulations
– Improved information technology
infrastructure
Measuring Trade Facilitation:
Four Areas of Focus
1.
2.
3.
4.
Port efficiency
Customs environment
Regulatory environment
Service sector infrastructure
Building Indicator
Step 1: Defining Inputs to Indicator
n
Cross-economy survey data- up to 131
economies
– Global Competitiveness Report (GCR)
– Global Information Technology Report (GITR)
– World Competitiveness Yearbook (WCY)
– Kaufmann, Kraay and Zoido-Lobaton (KKZ)
Building Indicator
Step 1: Defining Inputs to Indicator
Ø
“Port efficiency” for each economy J is the average of two indexed
inputs from GCR:
v
v
Ø
“Customs environment” for each economy J is the average of two
indexed inputs from GCR:
v
v
Ø
Hidden import barriers
Presence of irregular extra payments and bribes
“Regulatory environment” for each economy J is constructed as the
average of indexed inputs from WCY and KKZ:
v
v
Ø
Port facilities and inland waterways
Air transport
Transparency of government policy is satisfactory (WCY)
Control of corruption (KKZ)
“Service-sector infrastructures” for each economy J is from GCR/GITR:
v
Extent of business internet use
Average trade facilitation
performance by region
Source: Author’s calculation based on Global Competitiveness Report, World Competitiveness
Yearbook, Global Information Technology Report, and World Bank Governance Index.
Average trade facilitation
performance for NEA countries
in 2011
Source: Author’s calculation based on Global Competitiveness Report, World Competitiveness Yearbook,
Global Information Technology Report, and World Bank Governance Index.
Country-level Comparison in NEA
Ø
Ø
Ø
Ø
4 index categories (port efficiency, etc.)
Cost to export/import
Documents required to export/import
Time to export/import
Port efficiency of the NEA
countries in 2011
Regulatory environment of the
NEA countries in 2011
Customs environment of the NEA
countries in 2011
Service sector infrastructure of
the NEA countries in 2011
Cost to import (in USD)
2005
2011
Documents required to import (in
Number)
2005
2011
Time to import (in Days)
2005
2011
Average trade facilitation
performances of NEA and EAP
Measuring Effect:
Gravity Model
Ø
Gravity model -Accounting trade by
– Gravity factors- GNP, population, distance
– Trade promoting factors-FTA, facilitation
– Trade limiting factors- regulations, distance and other
frictions
Ø
Characteristics
– Statistical approach
– Essentially based on partial equilibrium
Data for Otsuki (2011)
Panel data for 131 countries
ØTrade data
–Bilateral trade values in manufacturing products
from UN Comtrade database (From 5-8 of SITC rev 1 except
“non-ferrous metals”)
ØFTA dummy
–Obtained from WTO
FTA=1 if countries I and J are in any FTA
FTA=0 otherwise.
Simulation
Halfway-Up to the Global Average
Trade flow
Value of Trade
Trade
gain
economy X’s initial level
economy X’s target level
Global average level
Trade facilitation indicator
Simulation Analysis
Improvement of the below-average countries
to halfway toward the global average
uTrade data and TF indicators for year 2011
are used to predict the effect of change in TF
indicators
uLimitations
Lack of recent data on Mongolia’s
exports
Intra-regional trade in NEA
Trade Volume in 2011
in million USD
A fraction of
country's GDP
China
238,792 (8.97%)
0.033
Russia
52,186 (11.76%)
0.028
3,317 (63.96%)
0.379
206,805 (26.61%)
0.185
Mongolia
RoK
Note: Inside the parenthesis is % of the country’s total trade volume
Source: Author’s calculation based on UN Comtrade database
Inter-regional Trade in NEA
Trade Volume in 2011 in million
USD
A fraction of
country's GDP
China
2,422,266 (91.03%)
0.331
Russia
391,734 (88.24%)
0.211
1,869 (36.04%)
0.213
570,367 (73.39%)
0.511
Mongolia
RoK
Note: Inside the parenthesis is % of the country’s total trade volume
Source: Author’s calculation based on UN Comtrade database
Trade gains as exporter by
region (1,000 USD)
Trade gains as importer by
region (1,000 USD)
Preliminary Findings
ØWide
within-region variation of TF
capacity in NEA
Ø Significant room for trade expansion
ØAll areas in TF are found to contribute to
trade expansion in NEA ($3.9 billion)
ØRegulatory
environment and customs
environment seem to be priority areas for
capacity development
Preliminary Findings
ØEffort
by NEA only marginally contribute
to creation of the intra-regional trade, but
will have much greater effect on trade
expansion with the rest of the world.
ØIn terms of trade volume, China will gain
most from TF, but in terms of rate of
growth or its ratio to GDP, Mongolia will
gain most.
Further Research
Impact of additional indicators which are
relevant
Ø Bilateral trade costs and cross-border
issues specific to GTR
Ø Eliminating size effect
Ø
Thank You