Trade facilitation in the presence of non-independent impediments

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Abstract

With the virtual disappearance of tariffs, domestic export time delays have emerged as what is arguably the next most significant obstacle to trade. This may explain recent initiatives to combat delays independently of other trade transaction costs by a variety of regional and international organisations, including the WTO. Such initiatives have resulted in important reductions in export time delays in forty per cent of developing countries. In this paper, we propose a novel mechanism by which reductions in delays induce governments to respond by increasing the export fees that they charge exporters. We test this prediction empirically and use a difference gravity approach to investigate the joint impact of both delays and export fees on the flow of trade. Our results support the hypothesis of endogenous export fees which suggests that policies targeting delays in isolation are, at least ex ante, suboptimal. Our findings further show that for exporters of low-value and time-insensitive goods, such as many developing countries, export fees are at least as significant an impediment to exports as delays.

Original languageEnglish
Number of pages34
JournalWorld Economy
DOIs
Publication statusAccepted/In press - 2021

Keywords

  • bilateral trade
  • difference gravity model
  • endogenous export fees
  • infrastructure
  • institutional quality
  • Trade policy

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