OECD Trade Facilitation Indicators

4.  Further Trade Facilitation Reforms are Critical to Promote Competitiveness

Trade facilitation reforms since the conclusion of the TFA are estimated to have helped to reduce trade costs by almost 5% on average worldwide (Figure 4.1). Impacts from reductions in border bottlenecks and red tape are strongest for developing countries, particularly low-income and lower-middle income economies for which trade costs remain the highest, and for manufacturing sectors as chemicals, electrical equipment, machinery, paper and wood products, and textiles.

At a regional level, the strongest impacts are in Sub-Saharan Africa and Asia-Pacific regions, with up to 6% decreases in trade costs resulting from trade facilitation reforms. They are followed by Latin America and the Caribbean with 4.7%, Europe and Central Asia with 3.4%, and Middle East and North Africa with more than 3.3%.

Further trade facilitation reforms are critical for promoting competitiveness and economic growth through trade costs reductions. Continuing to improve the efficiency of border processes can deliver up to 12 percentage points more in trade costs reductions than those experienced so far across the regions covered (Figure 4.1).

Figure 4.1. Trade costs reductions associated to trade facilitation reforms a decade after the conclusion of the WTO TFA (2012-22): What has happened so far and looking ahead

 

Note: The figure presents the trade cost implications of fully implementing trade facilitation reforms as measured by the TFIs. Analysis using trade costs (manufacturing and agriculture) from the UNESCAP – World Bank database for the period 2012-22.

Source: Calculations based on methodology in Sorescu and Bollig (2022[2]).

Improvements in operational practices matter most. On average, a 1% improvement in implementation in practice (such as the proportion of trade transactions that can be processed in advance or the coverage of authorised operator programmes) can enhance trade by 1.2% (Figure 4.2). This implies that it is not only important to introduce the laws and regulations to make tools such as pre-arrival processing, Authorised Operators (AOs), post-clearance audits or Single Windows accessible to traders, but to ensure that in practice they gradually cover larger shares of trade transactions.

Improving operational practices in transparency matters almost as much as improving them for automation tools. This highlights that accompanying the introduction of new or adjusted regulations with more time between publication and their entry into force or with user manuals is linked to increasing the share of trade processes and documents that can be lodged electronically.

Figure 4.2. The trade flow response to improving operational practices is stronger than the implementation of regulatory frameworks

Percentage improvement from a 1% improvement in trade facilitation areas

Note: The figure shows the coefficients of the TFI variables (by category: regulatory framework and operational practices) regressed against trade flows, controlling for other variables. Estimates use trade flows based on the USITC ITPD-E database for the period 2012-19.

Source: Calculations based on methodology in Sorescu and Bollig (2022[2]).