RESEARCH AND ANALYSIS: WORKING PAPERS

A New Look at the Extensive Trade Margin Effects of Trade Facilitation

We estimate the effects of trade facilitation on the extensive margins of trade. Using OECD Trade Facilitation Indicators — which closely reflect the Trade Facilitation Agreement negotiated at the Bali WTO Ministerial Conference of December 2013 — we show that trade facilitation in a given exporting country is positively correlated with the number of products exported by destination and with the number of export destinations served by product.

To address the issue of causality, we employ an identification strategy whereby only exports of new products, or exports to new destinations, are taken into account when computing the respective margins of trade. Our findings therefore imply a positive causal impact of trade facilitation on the extensive margins of trade. The results are, to a large extent, robust to alternative definitions of extensive margins, to different sets of controls variables and to various estimation methods. Simulating the effect of an increase to the regional or global median values of trade facilitation, we are able to quantify the potential extensive margin gains of trade facilitation reform in different regions.

 

No: ERSD-2014-16

Authors: Cosimo Beverelli and Robert Teh — Economic Research Division, World Trade Organization; Simon Neumueller — Graduate Institute of International and Development Studies

Manuscript date: October 2014

Key Words:

Trade facilitation, Export diversi cation, International trade agreements, WTO

JEL classification numbers:

F13, F14, F17

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Disclaimer 

This is a working paper, and hence it represents research in progress. The opinions expressed in this paper are those of its authors. They are not intended to represent the positions or opinions of the WTO or its members and are without prejudice to members' rights and obligations under the WTO. Any errors are attributable to the authors.

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