The Effects of Trade Facilitation on Trade Performance in Africa

Abstract

International trade is now an embodiment of the new order of the global economy, as it ensures the movement of goods and the factors involved in the production of these goods from one country to the other.However, several authors (see, e.g., Wilson et al., 2003;Portugal-Perez and Wilson, 2009;Mbekeani, 2010;Portugal-Perez and Wilson, 2012;Hoekman et al., 2017) have shown that the effectiveness of this movement depends largely on how trade is facilitated among the countries involved.Especially, for developing countries, such as those in Africa, trade facilitation is an important trade strategy because of the systematic market and coordination failures emanating from information asymmetry (Yakop and van Bergeijk, 2011).This market failure is more likely to affect South-South trade adversely, such that without trade facilitation by governments, market opportunities may be created even through trade agreements, but they cannot be utilized effectively (Afesorgbor, 2018). 1 This is the case because complex trade arrangements dissuade firms and countries engaging in international production and trade.It becomes imperative therefore that what matters for trade facilitation is well understood by policy makers of all countries by incorporating policies aimed at facilitating trade into their long-term development agenda.Interestingly, the promotion of trade facilitation measures is the key rationale behind the 2013 World Trade Organization (WTO) trade facilitation agreement 2 meant to expedite the clearance and movement of goods across borders globally.Broadly speaking, trade facilitation involves all arrangements aimed at improving border and transport efficiency and reducing transaction costs associated with trade flows.These arrangements include but are not limited to issues of transport and transit, professionalism of customs authorities, transparency, banking and insurance, business practices, telecommunications and conformity to international (regional) standards (see Buyonge and Kireeva, 2008;Portugal-Perez and Wilson, 2009;Freund and Rocha, 2011;Moïsé et al., 2011;Rippel, 2011;Narayanan et al., 2016;Sakyi et al., 2018).However, in this paper we limit our analysis to the potential impact of trade facilitation, specifically the improvement in border and transport efficiency, namely, time to export, cost to export, the number of documents required to export, time to import, cost to import and the number of documents required to import, as well as the distance to frontier.3 The focus on these trade facilitation variables is particularly important as the region is noted for having one of the highest bureaucracies and custom procedures according to the World Bank Doing Business reports.

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