Transparency and trade facilitation in the Asia Pacific : estimating the gains from reform

Abstract

Abstract: Transparency is an important but under-researched aspect of trade facilitation. We define transparency of the trading environment in terms of two elements— predictability and simplification. Using factor analysis, we produce composite indices of exporter and importer transparency that summarize information on these two elements drawn from a wide range of sources. Estimation results from a gravity model of intra-APEC trade suggest that importer transparency is positively and significantly related to bilateral trade, and that its impact is quite separate from the nominal restrictiveness of tariffs and NTBs. This result is robust to the presence of zero trade flows, and holds even with application of an instrumental variables estimator to account for the potential endogeneity of transparency with respect to trade. Counterfactual simulations show that improving trade-related transparency could hold significant benefits for APEC: at least $148bn, or 7.5 % of baseline trade. We find evidence that these benefits are greater than for other ready alternatives, such as moderate reductions in the restrictiveness of tariffs and non-tariff barriers.

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