A Framework to Achieve the Busan Roadmap

Transcription

___________________________________________________________________________
2007/ASCC/1.2
Session: Gains from Trade Facilitation
1.2.2
A Framework to Achieve the Busan Roadmap
Purpose: Information
Submitted by: Dr Sang Kyom Kim
Korea Institute for International Economic Policy
Annual Conference of APEC Centres
Melbourne, Australia
18-20 April 2007
A Framework to Achieve the Busan Roadmap:
Trade Facilitation and Its Implications
I. Introduction
APEC Leaders at the 14th APEC Economic Leaders’ Meeting held in Hanoi on 18–19
November 2006 welcomed and endorsed the “Hanoi Action Plan to Implement the Busan
Roadmap towards the Bogor Goals,” which is a comprehensive set of specific measures,
schedules, and capacity building initiatives. In particular, Leaders highlighted numerous
steps taken to carry the Busan Business Agenda forward and welcomed the new trade
facilitation framework that targets a further reduction of trade transaction costs by 5% in the
APEC region by 2010.
In fact, APEC’s efforts to promote trade facilitation have emerged as an important engine for
achieving Bogor goals since 2001. As a follow up to the mandate to reduce transaction cost
as addressed in Shanghai Accord in 2001, APEC member economies developed a Trade
Facilitation Action Plan (TFAP) and agreed to report annually the progress individual
economy has made in the area of 1) customs procedures, 2) standard and conformance, 3)
business mobility, and 4) e-commerce. As “A Mid-term Stocktatke of progress Towards the
Bogor Goals” report clearly suggests that trade and investment facilitation, transparency and
behind-the-border regulations and administrative procedures are now emerging as important
determinants that ensure that Bogor goals are achieved under new economic environment.
More specifically, APEC Ministers met in Busan instructed APEC Senior Officials to carry out
further concrete actions in identified priority areas, such as improving customs procedures,
enhancing the alignment of domestic standards, facilitating business mobility and fostering a
paperless trading environment, with a view of producing tangible benefits for the business
community.
Under this background, this study attempts to identify and construct concrete strategies to
realize the Busan Roadmap with particular reference to the trade facilitation framework. For
the purposes of this study, qualitative, as well as quantitative analysis, is conducted.
A survey was specifically conducted to target Korean businesses engaged in trade activities
with other APEC member economies to measure the relationship between trade costs and
trade facilitation, encompassing customs procedures, standards and conformity, business
mobility, and e-commerce usage. Building on the outcome of the survey analysis, we first
construct the “APEC Trade Facilitation Index,” then estimate the economic effects of trade
facilitation taking into account various policy options, and finally identify more concrete and
specific strategies to promote trade facilitation in APEC.
The purpose of this paper is not to develop work plans that would take TFAP 2 for
successful implementation of another 5% percent reduction in trade transaction cost by 2010.
On the contrary, this paper will attempt to draw up four distinct scenarios (policy options) that
APEC policy makers may consider during the course of designing Action Plans to achieve
Busan Roadmap with particular reference to trade facilitation activities. This study employs
the “Gravity Model” and the “Computable General Equilibrium (CGE) Model” to forecast
quantitative economic effects. The outcomes that this study finds provide us with insights
and strategies that APEC can implement to better cooperate with other member economies
and promote APEC’s long term goal of establishing an Asia Pacific Economic Community.
II. Economic Effects of Trade Facilitation: Methodology
2.1 Indexation of Trade Facilitation
In contrast to the case of trade liberalization whose main mechanism is tariff reduction,
measuring economic effects of the trade facilitation is not an easy task to tackle. Not until
recently when the works of Mann (2004), Wilson, Mann, and Otsuki (2003, 2005)
have .introduced new techniques of linking trade facilitation and transaction cost (Chain
Rule), most studies have utilized tariff, as a proxy to quantify the economic effects of trade
facilitation
However, such methods do not fully reflect the effects of trade facilitation whose economic
effects are created through reduction of non-tariff transaction costs; trade facilitation is
clearly differentiated from trade liberalization.
In order to identify the path through which trade facilitation makes an economic impact, a
trade facilitation index is constructed. In order to obtain relevant data set, a survey was
conducted targeting Korean firms exporting (and importing) their products to APEC
economies. More sepecifically, we collected views from the business sectors on the level of
barriers in four areas: customs procedures, standards, business mobility and electronic
commerce. The main components relevant to trade facilitation trade facilitation (amongst the
survey results) were selected from the survey results and used to compute the trade
facilitation index. Table 1 shows the “Trade Facilitation Index” constructed by the survey
outcome.
<Table 1> APEC Trade Facilitation Index
Customs
Procedures
S
Index
Standards and
Business Mobility
Conformity
S
Index
AV
RV
AV
RV
S
Index
AV
RV
Electronic
Commerce
S
Index
AV
RV
Brunei
23
5.00
1.01
19 5.21
1.01
20
5.25
0.95
15
3.73
0.75
Indonesia
152
4.84
0.98
142 5.21
1.01
143
5.68
1.03
115
4.71
0.95
Malaysia
111
5.16
1.04
112 5.38
1.04
113
5.76
1.04
91
5.05
1.02
Philippines
114
5.18
1.04
113 5.35
1.04
117
5.80
1.05
83
4.96
1.00
Singapore
132
5.57
1.12
133 5.49
1.06
127
5.96
1.08
100
5.63
1.13
Thailand
114
5.16
1.04
114 5.32
1.03
117
5.78
1.05
90
4.91
0.99
Vietnam
175
4.52
0.91
171 5.05
0.98
167
5.31
0.96
127
4.21
0.85
Australia
142
5.25
1.06
141 5.33
1.03
141
5.72
1.04
105
5.61
1.13
New Zealand
86
5.52
1.11
87 5.38
1.04
86
5.91
1.07
64
5.14
1.03
PNG
16
5.00
1.01
15 5.07
0.98
16
5.63
1.02
14
4.43
0.89
Canada
141
5.09
1.03
140 5.04
0.98
139
5.49
1.00
113
5.60
1.13
Mexico
77
4.48
0.90
74 5.09
0.99
72
5.47
0.99
57
4.53
0.91
U.S.A.
338
4.43
0.89
337 4.72
0.91
341
4.55
0.83
271
5.46
1.10
Chile
64
5.32
1.07
58 5.45
1.05
59
5.51
1.00
44
4.93
0.99
Peru
37
4.65
0.94
38 5.21
1.01
40
5.43
0.98
33
4.67
0.94
China
326
4.21
0.85
325 4.77
0.92
331
5.05
0.92
264
4.41
0.89
H. K., China
199
5.72
1.15
198 5.59
1.08
197
6.15
1.11
158
5.68
1.14
Japan
292
5.04
1.02
296 4.79
0.93
295
5.73
1.04
228
5.54
1.12
Korea
334
5.02
1.01
327 5.15
1.00
327
5.58
1.01
285
5.73
1.15
Chinese
Taipei
164
5.29
1.07
162 5.40
1.05
164
5.78
1.05
128
5.37
1.08
Russia
126
3.73
0.75
126 4.56
0.88
120
4.33
0.78
100
4.06
0.82
151
4.96
1.00
149 5.17
1.00
149
5.52
1.00
118
4.97
1.00
Average
Note: 1. S (Sample Size), AV (Absolute Value). RV (Relative Value)
2. Range for AV: 1 - 7 (i.e. 1: highest barriers, 7: lowest barriers)
3. RV = AV/APEC-wide average (e.g. 4.96 for Customs Procedures, 5.17 for
Standards and Conformity, 5.52 for Business Mobility, 4.97 for Electronic Commerce)
2.2 Forecasting Methodology
In order to explain the relationship between trade facilitation and trade volumes within APEC
economies, an empirical analysis is conducted using the trade facilitation index, posted in
table 1, as an explanatory variable in the gravity equation. At the same time, the chain rule,
which identifies the functional relationship between important variables that determine trade
volume, is applied to empirically examine the indirect relationship between trade facilitation
and trade transaction costs. Lastly, four scenarios (policy options) for possible trade
facilitation schemes and elasticities that are defined and calculated using the chain rule in
the previous step are substituted into the CGE equation to compare the economic impacts of
each policy option.
<Table 2> Research Steps for the Empirical Analysis
Steps
1 step
st
2nd step
3rd step
4th step
Trade Facilitation Index for each APEC
economy and sector is constructed
Relationship between trade facilitation (using
Trade Facilitation Index) and trade volumes
within the APEC region is examined.
Relationship between trade facilitation (using
Trade Facilitation Index) and trade
transaction costs within APEC region is
empirically examined.
Economic impacts of trade facilitation are
examined.
Method
Survey targeting Korean
exporting firms is
conducted to examine
trade facilitation.
Gravity Equation is
empirically estimated.
Chain Rule and Gravity
Equation (Step 2) are
combined for empirical
analysis.
CGE Analysis
2.3 Scenarios (Policy options)
In order to attempt to provide policy makers with concrete and realistic strategies to promote
trade facilitation in the APEC region, different set of scenarios are designed based on
following approaches: 1) successful completion of mandate (5% reduction in trade
transaction cost by 2010) as addressed in Busan Roadmap (scenario I), 2) imposition of
strengthened trade facilitation requirement (50% further reduction in transaction cost, that is
from 5% reduction to 7.5% reduction) to the developed economies (Australia, Canada, H. K.,
China, Japan, Korea, New Zealand, Singapore, U.S.A.), 3) Full implementation of TFAP 1, 4)
Implementation of average level of completion corresponding to each economy’s stage of
development (developing/developed).
Four policy options for trade facilitation that are examined in this study are described in
Table 3.
<Table 3> Scenarios (Policy Options) for Trade Facilitation
Scenarios
<Scenario I>
Implementation of Busan
Business Agenda
<Scenario II>
Application of the
pathfinder approach
<Scenario III>
Implementation of TFAP 1
▪ 5% reduction in trade transaction cost by 2010
▪ 7.5% reduction for the developed economies by 2010
▪ 5% reduction for the developing economies by 2010
▪ Full implementation of the Trade Facilitation Action Plan 1
(base year 2005) by all member economies
<Scenario IV>
Implementation of average
rate of completion
▪ Implement up to an average level of completion in 4 major
areas reported in TFAP 1
▪ Each economy set target level corresponding to its stage of
development (developing/developed)
Note: Scenario 3 and 4 is based on table 4
<Table 4> Overview on Implementation of Trade Facilitation Actions and Measures
Number of Items
Selected
(Percentage of
participation)
Brunei
Number of Items Number of Items Percentage of
Implemented
in Progress
Implementation
C
45(75%)
C
26
C
9
C
58%
S
12(60%)
S
8
S
4
S
67%
B
4(67%)
B
3
B
1
B
75%
E
6(100%)
E
3
E
3
E
50%
40
67(69%)
Indonesia
17
60%
C
60(100%)
C
51
C
4
C
85%
S
20(100%)
S
10
S
7
S
50%
B
6(100%)
B
4
B
1
B
67%
E
11(100%)
E
10
E
0
E
91%
97(100%)
75
12
77%
C
Malaysia
46(77%)
C
S
11
S
9
S
55%
B
5
B
1
B
83%
E
11(100%)
E
10
E
1
E
91%
61
C
37
C
8
C
82%
S
15(75%)
S
9
S
6
S
60%
B
5(83%)
B
3
B
2
B
60%
E
10(91%)
E
7
E
3
E
70%
56
75%
39(65%)
C
38
C
1
C
97%
S
11(55%)
S
10
S
1
S
91%
B
5(83%)
B
5
B
0
B
100%
E
8(73%)
E
8
E
0
E
100%
61
2
97%
C
53(88%)
C
32
C
13
C
60%
S
20((100%)
S
6
S
12
S
30%
B
6(100%)
B
2
B
3
B
33%
E
11(100%)
E
6
E
5
E
55%
46
33
51%
C
49(82%)
C
19
C
2
C
39%
S
20(100%)
S
10
S
1
S
50%
B
6(100%)
B
2
B
3
B
33%
E
11(100%)
E
5
E
1
E
45%
36
7
42%
C
42(70%)
C
31
C
9
C
74%
S
19(95%)
S
17
S
2
S
89%
B
6(100%)
B
6
B
0
B
100%
E
10(91%)
E
0
E
10
E
0%
54
21
70%
C
42(70%)
C
31
C
9
C
74%
S
56(280%)
S
53
S
2
S
95%
B
17(280%)
B
12
B
3
B
71%
E
6(55%)
E
3
E
3
E
50%
99
17
82%
C
39(65%)
C
30
C
9
C
77%
S
16(80%)
S
13
S
3
S
81%
B
6(100%)
B
5
B
1
B
83%
E
11(100%)
E
3
E
8
E
27%
51
72(74%)
Mexico
19
C
121(125%)
Canada
73%
45(75%)
77(79%)
New Zealand
27
C
86(89%)
Australia (2006)
76%
20(100%)
90(93%)
Vietnam
C
6(100%)
63(65%)
Thailand
16
B
75(77%)
Singapore
C
S
83(86%)
Philippines
35
21
71%
C
60(100%)
C
23
C
27
C
38%
S
20(100%)
S
2
S
14
S
10%
B
6(100%)
B
2
B
4
B
33%
E
11(100%)
E
7
E
0
E
64%
97(100%)
34
45
35%
C
U.S.A.
17(28%)
C
0
C
0
C
S
S
S
S
B
B
B
B
E
2(18%)
E
0
E
0
E
19(20%)
Chile
0%
C
42(70%)
C
31
C
9
C
74%
S
20(100%)
S
4
S
7
S
20%
B
6(100%)
B
3
B
1
B
50%
E
11(100%)
E
1
E
7
E
9%
39
79(81%)
Peru
C
34
C
4
C
89%
S
14(70%)
S
2
S
5
S
14%
B
2(33%)
B
2
B
0
B
100%
E
70%
C
43
C
2
C
72%
S
20(100%)
S
7
S
5
S
35%
B
6(100%)
B
3
B
2
B
50%
E
11(100%)
E
1
E
2
E
9%
54
11
56%
C
33(55%)
C
31
C
2
C
94%
S
19(95%)
S
13
S
6
S
68%
B
6(100%)
B
2
B
4
B
33%
E
9(82%)
E
2
E
7
E
22%
48
19
72%
C
60(100%)
C
54
C
2
C
77%
S
20(100%)
S
11
S
7
S
55%
B
6(100%)
B
4
B
1
B
67%
E
11(100%)
E
10
E
0
E
91%
79
10
81%
C
46(77%)
C
44
C
1
C
96%
S
11(55%)
S
9
S
1
S
82%
B
6(100%)
B
5
B
0
B
83%
E
12(109%)
E
10
E
2
E
83%
68
75(77%)
4
91%
C
40(67%)
C
32
C
7
C
80%
S
26(130%)
S
20
S
4
S
77%
B
6(100%)
B
4
B
0
B
67%
E
11(100%)
E
4
E
7
E
36%
60
83(86%)
Russia
9
60(100%)
97(100%)
Chinese Taipei (2006)
E
C
67(69%)
Korea (2006)
E
38
97(100%)
Japan
49%
38(63%)
54(56%)
H.K., China
24
C
E
China
0
14
72%
C
44(73%)
C
11
C
24
C
25%
S
20(100%)
S
7
S
12
S
35%
B
3(50%)
B
3
B
0
B
100%
E
16(145%)
E
2
E
8
E
26%
83(86%)
23
44
28%
Notes:
1. Parenthesis in the third column indicates percentage of participation in each area (97
items are suggested by APEC TFAP 1: 60 items in customs procedures, 20 items in
standards, 6 items in business mobility, 11 items in electronic commerce)
2. C: Customs Procedures, S; Standards, B: Business Mobility, E: Electronic Commerce
3. Data for most economies are based on the TFAP 1 reported in 2005 otherwise indicated
Source: APEC. 2005. Trade Facilitation Action Plan.
III. Empirical Analyses
3.1 Gravity Model Estimation
Trade transaction costs can be defined as costs that occur from barriers to trade between
countries. According to Anderson and Winscoop (2004), trade transaction costs include
distribution costs and international trade transaction costs, which are again divided into
transporting costs and border-associated costs. Border-associated costs include trade
transaction costs that accrue from tariffs and out-dated trade facilitation.
Broadly speaking, trade facilitation activities help expand trade liberalization and improve
welfare through enhanced resource allocation by reducing or eliminating the waste of
unnecessary resources. In this study, an empirical analysis is conducted to see whether and
to what extent a reduction in trade transaction costs will occur as a result of tariff reductions
(to further liberalize trade) and improvement in the four major trade facilitation areas.
Empirical analyses of the effects trade facilitation (computed previously) and tariff rates
(trade volumes) on the gravity equation are carried out. The gravity equation in this study
includes four main trade facilitation indices and the tariff rate, in addition to conventional
variables used in the gravity model as described below:
(1)
where i and j represent APEC economies and t indicates year.
- IMijt is import from economy j to economy i in year t,
- GDP: Gross Domestic Product
- Dist: Distance between economy i and j
- Area: Area of each economy
- Border: Dummy variable which indicates 1 if economy i and j share the border and 0
otherwise
- Language: Dummy variable which indicates 1 if economy i and j use the same language
and 0 otherwise
- RTA ijt: Dummy variable which indicates 1 if economy i and j belong to the same regional
trade agreement and 0 otherwise
- Tariff: Import Tariff Rate
- CP: Trade facilitation index for Customs Procedures in year t, from economy j to economy i
- SC: Trade facilitation index for Standards and Conformity in year t, from economy j to
economy i
- BM: Trade facilitation index for Business Mobility in year t, from economy j to economy i
- EC: Trade facilitation index for E-commerce in year t, from economy j to economy i
- Year: Year dummy
The empirical analysis of the gravity equation based on panel data of APEC economies was
conducted using random effect estimations, summarized in Table 5.
<Table 5> Estimation Result for Gravity Model [Dependent Variable: log(Import)]
Log of GDP
(exporting economy)
Log of GDP
(importing economy)
Log of Population
(exporting economy)
Log of Population
(importing economy)
Log of Distance
Log of the multiplication of
Area i and Area j
Border Dummy
Language Dummy
RTA Dummy
Tariff Rate
CP (Customs Procedure)
(1)
0.622
(0.021)***
0.247
(0.025)***
0.063
(0.052)
0.539
(0.055)***
-0.946
(0.089)***
-0.158
(0.023)***
0.655
(0.304)**
0.560
(0.183)***
0.161
(0.043)***
-0.060
(0.030)**
0.837
(0.047)***
(2)
0.622
(0.021)***
0.253
(0.025)***
0.064
(0.052)
0.515
(0.055)***
-0.952
(0.089)***
-0.159
(0.023)***
0.637
(0.304)**
0.558
(0.184)***
0.162
(0.043)***
-0.060
(0.030)**
(3)
0.622
(0.021)***
0.254
(0.025)***
0.064
(0.052)
0.515
(0.054)***
-0.941
(0.089)***
-0.159
(0.023)***
0.672
(0.304)**
0.569
(0.184)***
0.163
(0.043)***
-0.060
(0.030)**
0.824
(0.047)***
SC (Standards and Conformity)
0.822
(0.047)***
BM (Business Mobility)
EC (E-commerce)
Number of Observation
R2
(4)
0.622
(0.021)***
0.239
(0.025)***
0.064
(0.052)
0.532
(0.055)***
-0.943
(0.089)***
-0.159
(0.023)***
0.681
(0.303)**
0.540
(0.184)***
0.160
(0.043)***
-0.058
(0.030)*
3,539
0.72
3,539
0.72
3,539
0.72
0.857
(0.047)***
3,539
0.73
Note: *, **, *** indicate significance at the 10%, 5%, and 1% level, respectively.
3.2 Chain Rule Analysis
In order to construct the CGE (Computable General Equilibrium) Model, which examines the
economic impacts of trade liberalization and trade facilitation by reducing tariff rates, the
relationship of tariff rates to i) each trade facilitation index, ii) transaction costs (TC), and iii)
trade volumes should be defined in the model. Accordingly, this study adopts the chain rule
to define the functional relationship as in equations (2) to (6), following Kim et.al (2005).
∂TC
∂IM ∂Dist ∂TC
=
⋅
⋅
∂Tariff ∂Tariff ∂IM ∂Dist
∂TC ∂IM ∂Dist ∂TC
=
⋅
⋅
∂CP ∂CP ∂IM ∂Dist
=
⋅
⋅
∂SC ∂SC ∂IM ∂Dist
(2)
(3)
(4)
∂TC
∂IM ∂Dist ∂TC
=
⋅
⋅
∂BM ∂BM ∂IM ∂Dist
=
⋅
⋅
∂EC ∂EC ∂IM ∂Dist
(5)
(6)
The coefficient estimates are presented below. The value for
∂TC
is assumed to be 0.2, as
∂Dist
in Kim et.al (2005) and following other literature. Each elasticity can be computed by
applying each coefficient estimate and 0.2 for

∂TC
. We get the following results:
∂Dist
Tariff Elasticity of Trade Transaction Costs = -0.01259
CP (Customs Procedure) Elasticity of Trade Transaction Costs = -0.17696
SC (Standards and Conformity) Elasticity of Trade Transaction Costs = -0.17311 BM
(Business Mobility) Elasticity of Trade Transaction Costs = -0.17471
ICT (Information and Communication Technologies) Elasticity of Trade Transaction
Costs = -0.18176
3.3 CGE Model Analysis
Using the trade facilitation index computed in the previous section, a CGE model analysis is
conducted to compare the economic effects of the four different policy options or scenarios.
The distinctive feature of this research is that by constructing and computing the trade
facilitation index, the different levels of trade facilitation by member economies can be
identified, whereas existing studies assume that a reduction in trade transaction costs
through improvement of trade facilitation applies to all APEC economies equally. This study
utilizes different elasticities from each sector of trade facilitation into the functional
relationship.
In order to assess the economic effects of trade facilitation, some adjustments are required
to the existing model, which assesses the economic effects caused by a reduction/removal
of tariff and non-tariff barriers. To do so, a new variable that represents trade transaction
costs is adopted in the CGE model; the transaction costs arising from customs delays can
be regarded as “iceberg” trade costs, generally used in the field of international trade. That is,
let us assume that the transaction cost of 1 unit of a good is δ (> 1) and the price of an
imported product that consumers face is P ⋅ δ , respectively. Trade facilitation is pursued to
reduce the effective price of imported goods that consumers face by reducing trade
transaction costs. To reflect such effects in the CGE model, this study introduces the
concept of effective price, following Hertel et al. (2002). The effective price of good i that
economy s imports from economy r can be stated as Pirs* and the relationship between Pirs*
and the export price Pirs can be expressed as follows:
Pirs* = δ ⋅ Pirs ⋅ δ > 1 (7)
In the initial equilibrium, δ = 1 . In the CGE model, price and quantity are generally
expressed separately, and to maintain the balance of the model, the quantity variable of
goods can be adjusted as follows:
*
Qirs
= Qirs ⋅
1
δ
(8)
Change in the total import volume and import growth rate for good i can be represented as
follows:
dQis dQirs dδ irs
dP
dδ
dP
=
−
+ σ im ( irs + irs − is )
δ irs
Qis
Qirs
Pirs
δ irs
Pis
dPis
dP
dδ
= ∑ θ iks ( iks + irs )
Pis
Piks
δ irs
k
(9)
(10)
where Pis and Qis represent the total price index and total import volume for good i, and σ im
and θ iks represent the cross-elasticity between import goods and the import proportion of
economy k. Equation (9) and (10) can be substituted into the CGE model to examine the
economic effects of trade facilitation.
The data used in this analysis is extracted from the GTAP Database (Ver. 6), which includes
industry-related input-output tables and the export and import data of countries in 2001.
*
represents the effective quantity of imports. Equation (7) and (8) can be multiplied to get
Qirs
*
Pirs* Qirs
= Pirs Qirs and, thus, the actual data can be used in the CGE model.
IV. Result of the Analysis
The results of the CGE analysis pertaining to the effects of trade facilitation on GDP, welfare,
and exports are summarized in Tables 4–6 and the interpretations of these results are
summarized from two perspectives: 1) the Economic Impact of Trade Facilitation and 2) the
Distribution of the Economic Impact of Trade Facilitation among member economies.
<Table 6> Effects of Trade Facilitation on GDP
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Australia
New Zealand
Canada
Mexico
United States
Chile
Peru
China
Hong Kong
Japan
Republic of Korea
Chinese Taipei
Option I
1.34
3.98
3.42
7.11
2.90
3.09
1.03
1.48
1.61
1.20
0.60
1.48
0.91
1.45
2.92
0.45
2.07
1.94
1.16
Option II
1.34
3.99
3.45
10.67
2.90
3.10
1.54
2.20
2.40
1.19
0.90
1.48
0.92
1.47
4.36
0.67
3.09
1.94
1.15
Option III
0.57
4.52
5.34
0.84
3.72
0.92
1.00
0.74
1.66
1.96
0.35
1.58
0.73
0.58
2.93
0.16
0.42
1.50
2.17
(Unit: %)
Option IV
1.33
3.96
3.37
3.73
2.89
3.08
0.54
0.78
0.84
1.20
0.31
1.47
0.90
1.43
1.53
0.23
1.10
1.93
1.16
Notes: 1.In Option 3, the average value of developed economies in APEC is applied to US.
2. For the Philippines, 2004 data is used instead.
3. For Peru, the average value of developing economies in APEC is applied to e-commerce.
<Table 7> Effects of Trade Facilitation on Welfare
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Australia
New Zealand
Canada
Mexico
United States
Chile
Peru
China
Hong Kong
Japan
Republic of Korea
Chinese Taipei
Russia
Option I
1.59
6.92
4.08
8.27
3.79
4.25
1.28
2.00
2.10
1.56
0.52
1.86
1.01
1.58
3.80
0.50
2.45
2.26
1.39
Option II
1.67
7.42
4.31
12.14
3.96
4.34
1.89
2.94
3.13
1.70
0.78
1.94
1.05
1.70
5.47
0.75
3.63
2.39
1.41
Option III
0.70
6.95
5.96
1.56
4.52
1.40
1.19
1.06
1.97
2.25
0.31
1.89
0.80
0.64
3.49
0.16
0.53
1.66
2.52
(Unit: %)
Option IV
1.51
6.41
3.83
4.58
3.61
4.15
0.70
1.09
1.11
1.42
0.28
1.77
0.97
1.45
2.20
0.26
1.32
2.13
1.36
Note: Same as above
<Table 8> The Effects of Trade Facilitation on Exports
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Australia
New Zealand
Canada
Mexico
United States
Chile
Peru
China
Hong Kong
Japan
Republic of Korea
Chinese Taipei
Russia
Note: Same as above
Option I
2.73
2.13
5.72
7.51
2.49
0.37
1.30
1.19
3.27
2.78
7.28
1.21
4.57
5.99
1.58
4.55
3.07
4.00
1.72
Option II
2.90
2.25
6.12
11.12
2.65
0.62
1.89
1.75
4.94
3.21
10.61
1.29
5.06
6.41
2.30
6.48
4.58
4.23
1.92
Option III
1.14
2.20
8.53
1.04
2.87
0.18
1.10
0.65
2.93
3.67
4.55
1.22
3.54
2.50
1.48
2.32
0.70
2.94
2.57
(Unit: %)
Option IV
2.55
2.01
5.31
4.02
2.32
0.13
0.71
0.65
1.67
2.36
4.06
1.14
4.10
5.56
0.89
2.69
1.61
3.76
1.52
Despite the fact that all four options bring a positive economic impact, the options that
concentrate on carrying out specific trade facilitation provisions existing (or modified) APEC
Trade Facilitation Action Plan Schemes (options III and IV) produced smaller effects, in
many instances, compared to options I and II.
It is clearly revealed that adoption of option II would be most favorable to most members in
terms of increase in GDP, welfare and trade. In this context, if developed members agrees to
take an addition burden, APEC may endeavor to focus on options II for more effective and
productive trade facilitation activities..
In addition, option II holds great meaning since it introduces the concept of the pathfinder
approach, one of the 6 major tasks of the Busan Roadmap, to the field of trade facilitation. In
fact, at the Shanghai Accord, after the adoption of the ‘pathfinder approach,’ rarely anything
has been practiced except for the implementation of the ‘APEC Business Travel Card.’
V. Conclusions and Policy Recommendations
Empirical outcomes generated by each scenario provide us with some policy implications. In
terms of increase in GDP, welfare and export, our quantitative measurements show that
implementation of trade facilitation objective set out in Busan Roadmap will result in
relatively great effects across the economies. Therefore, our research outcome suggests
that APEC member economies should more actively promote trade facilitation as a primary
means to achieve the Bogor Goals. As suggested in the Busan Roadmap, APEC member
economies are encouraged to take concrete action in four areas – customs, standards and
conformances, business mobility, and e-commerce – to achieve an additional 5% reduction
in transaction costs by 2010. Moreover, according to our research outcome, policy makers
should be advised that structural and regulatory reforms are to be implemented to promote a
more business-friendly environment. At the same time, as most trade facilitation activities
require huge amounts of fixed capital associated with modern technology, there is an
immediate need to enhance capacity building for developing economies.
Based on the major findings we have discussed so far, a conclusion can be reached from a
vast array of issues with a number of policy implications. In particular, with regard to the
APEC’s overall trade facilitation activities, a series of recommendations can be suggested as
follows.
First of all, although it is limited in terms of explaining the whole picture as it is constructed
from survey only targeted Korean companies, our forecasts suggest that the prospective
benefits would increase if the same deadline (2010) but different rate of reduction were
applied, taking into account the differing levels of economic development. More specifically,
provided that APEC developed economies reach consensus on the additional reduction in
transaction cost by 50% (from 5% to 7.5%), concrete action plans should be based on option
II, which will bring greater economic benefits than the one through a linear cut. Our
forecasting model also implies that as the more economies join in the developed groups the
size of the positive impacts will be greater.
In shift from Option 1 to Option 2, it is also found that most gains resulting from further
reduction in trade transaction costs by developed economies are distributed to those who
actually participate in further reduction whereas gains for developing economies are very
small.
Hence, this implies that free-rider problem is not prevalent in improvement in trade
facilitation in that the improvement is made through structural reform, de-regulation and
enhancing transparency, which improve the economies’ own economic strength. In this
regard, APEC member economies are suggested to increase their “structural reform” efforts
to enhance their trade facilitation.
Secondly, even if APEC’s current trade facilitation implementation programs in all 97 specific
fields of the 4 major areas are carried out (option III), the goal of achieving a 5% reduction in
trade transaction costs is likely to be very unrealistic (see table 6-8). In order to make
practical progress in the trade transaction cost reduction programs APEC must strive to
improve its implementation plans and the modality of its TFAP. As mid-term reviews of trade
facilitation activities point out, APEC member economies have been making great efforts to
achieve the 5% reduction in trade transactions costs as prescribed in the Shanghai Accord.
Our forecasting outcomes based on the “APEC Trade Facilitation Index (Table 1)” and
“Implementation of trade Facilitation Action and Measures (Table 4)” indicate that although
TFAP 1 have served as a useful framework for member economies to provide information on
their trade facilitation efforts but there is an immediate need for better and more extensive
quantitative reporting mechanism. It is also recommended that new reporting mechanism
should be more focused on the areas targeted for improvement and the measures to be
used in assessing progress (APEC 2006/SOM2/CTI/049).
Thirdly, individual member economies must set up and develop their own strategies to
promote trade facilitation in accordance to their policy environments including national
development strategies and principles of comparative advantage. For example, Korea has
placed a high priority on simplifying custom-related operations aiming at reducing transaction
cost with enhanced security. Korea has continued developing and implementing specific
actions and plans of improving channels of communications, technological equipment,
automation of customs operations and procedures to simplify trade operations. As a result, it
succeeded in reducing the clearance time from 9.6 in 2001 to 5.5 days in 2004.
Fourthly, APEC needs to set up “APEC Trade Facilitation Peer Review Mechanism” to
overview the whole of APEC approach to trade facilitation as well as the progress of the
newly developed TFAP 2. It is highly recommended that such peer review mechanism
should include modality evaluating performance rather than commitment.
Lastly, although trade facilitation is being carried out in all APEC member economies and is
expected to bring positive economic benefits to all members, it is also assumed that
limitations to trade facilitation reform activities in each economy will occur as well —
especially in specific areas such as the customs clearance process that requires a
considerable amount of investment in infrastructure. Therefore, in order to trigger a positive
economic impact in all member economies and throughout APEC, capacity building
initiatives for developing members are essential. Accordingly, it is highly recommended that
APEC launch joint programs with IFIs (International Financial Institutes), such as the World
Bank and the Asia Development Bank, and with other international organizations interested
in trade facilitation reforms, such as the OECD and UNCTAD.
References
Anderson, James and Eric van Wincoop. 2004. "Trade Costs." NBER Working Paper Series 10480.
APEC. 2005. Trade Facilitation Action Plans. Submitted by member economies.
APEC. (2006). “Review of APEC Trade Facilitation Action Plan 2001-2006.” SOM2/CTI/049
Kim Sangkyom, Innwon Pasrk, Soonchan Park and Sung-Hoon Park. 2005. How to Achieve Bogor
Goals: Action Plans and Economic Impacts. Policy Analysis KIEP, Korea
Mann, Catherine L. 2004. Achieving the APEC Shanghai Objective: A Methodology to Benchmark
and Quantify Trade Facilitation Effort in Financial Terms, APEC
Wilson, John S., Catherine L. Mann and Tsunehiro Otsuki. 2003. "Trade Facilitation and Economic
Development: Measuring the Impact," World Bank Policy Research Working Paper 2988.
Wilson, John S., Catherine L. Mann and Tsunehiro Otsuki. 2005. "Assessing the Benefits of Trade
Facilitation: A Global Perspective," The World Economy, 28(6), pp. 841-869.
__________________________________________________
*Please do not quote or cite without author’s permission
A Framework
to achieve Busan Roadmap
: Trade Facilitation and Its Implication
Sangkyom Kim
Executive Director, Korea APEC Study Center
Senior Research Fellow, KIEP
skkim@kiep.go.kr
Contents
Introduction
Introduction
Methodology
Methodology
Empirical
EmpiricalAnalyses
Analyses
Policy
PolicyRecommendations
Recommendations
1
Introduction
Shanghai Accord (2001)
Leaders’ mandate to cut transaction costs by 5% by 2006
Endorsement of TFAP1 (2002)
Four areas, 1) customs procedures, 2) standard and conformance, 3)
business mobility, and 4) e-commerce were agreed to be reported by
individual economies.
Busan Business Agenda (2005)
Further reductions in trade transaction costs by five percent by 2010
Hanoi Action Plan (2006)
Setting up Schedule of Activities to be conducted in the second phase
of TFAP(TFAP2) to implement the further reductions in transaction
costs as suggested in Busan Business Agenda.
Introduction (Cont’d)
Objective
To assess the improvement in Trade Facilitation Action Plans
since the mandate to reduce transaction cost as addressed in
Shanghai Accord in 2001
To assess the economic impacts of improvement in trade
facilitation.
To identify and construct concrete strategies to realize the Busan
roadmap with particular reference to the trade facilitation
framework.
2
Methodology
Steps
Method
1st step
- Trade Facilitation Index by APEC economies
and sectors is constructed.
- Four policy scenarios are built for
empirical analysis in the later steps.
The survey
targeting Korea’s
exporting firms is
conducted on trade
facilitation.
2nd step
- The relationship between trade facilitation (using
Trade Facilitation Index) and trade volume within
the
APEC region is examined.
Gravity Equation is
Empirically
estimated.
3rd step
- The functional relationship between important
variables that determine trade volume is identified
in the chain rule equation.
Chain Rule Approach
4th step
- Economic impacts of trade facilitation is examined. CGE Analysis
(Implementation Measures for Trade Facilitation
Action are used, Table 4)
1st Step: Survey, TF Index and
Scenario Building
Steps
1st
step
Method
The survey
targeting Korea’
Korea’s
exporting firms is
conducted on trade
facilitation.
2nd step
Trade Facilitation Index) and trade volume within
the
Gravity Equation is
Empirically
estimated.
3rd step
Chain Rule Approach
4th step
- Economic impacts of trade facilitation is examined.
CGE Analysis
3
1st Step: Survey
Consists of 24 questions
Extracting 1,035 firms with significant sales size (i.e.
listed in “1000 MK(Maekyong) Businesses (2006)” list or
exceeding 4M dollars of sales in export)
Selecting 694 firms after eliminating 341 firms who are
little export-oriented, have gone to court receivership
and/or have moved to different locations, etc.
Survey Method: Direct visit and interview
Response Rate: 76%
Number of Observations: 530
1st Step: Trade Facilitation Index
Customs
Electronic
Standards
Business Mobility
Procedures
S
Index
AV
RV
Commerce
S
Index
AV
RV
S
Index
AV
RV
S
Index
AV
RV
New Zealand
86
5.52
1.11
87
5.38
1.04
86
5.91
1.07
64
5.14
1.03
Chinese Taipei
164
5.29
1.07
162
5.40
1.05
164
5.78
1.05
128
5.37
1.08
Russia
126
3.73
0.75
126
4.56
0.88
120
4.33
0.78
100
4.06
0.82
Malaysia
111
5.16
1.04
112
5.38
1.04
113
5.76
1.04
91
5.05
1.02
Mexico
77
4.48
0.90
74
5.09
0.99
72
5.47
0.99
57
4.53
0.91
U.S.A.
338
4.43
0.89
337
4.72
0.91
341
4.55
0.83
271
5.46
1.10
Vietnam
175
4.52
0.91
171
5.05
0.98
167
5.31
0.96
127
4.21
0.85
4
Brunei
23
5.00
1.01
19
5.21
1.01
20
5.25
0.95
15
3.73
0.75
Singapore
132
5.57
1.12
133
5.49
1.06
127
5.96
1.08
100
5.63
1.13
Indonesia
152
4.84
0.98
142
5.21
1.01
143
5.68
1.03
115
4.71
0.95
Japan
292
5.04
1.02
296
4.79
0.93
295
5.73
1.04
228
5.54
1.12
China
326
4.21
0.85
325
4.77
0.92
331
5.05
0.92
264
4.41
0.89
Chile
64
5.32
1.07
58
5.45
1.05
59
5.51
1.00
44
4.93
0.99
Canada
141
5.09
1.03
140
5.04
0.98
139
5.49
1.00
113
5.60
1.13
Thailand
114
5.16
1.04
114
5.32
1.03
117
5.78
1.05
90
4.91
0.99
PNG
16
5.00
1.01
15
5.07
0.98
16
5.63
1.02
14
4.43
0.89
Peru
37
4.65
0.94
38
5.21
1.01
40
5.43
0.98
33
4.67
0.94
Philippines
114
5.18
1.04
113 5.35
1.04
117
5.80
1.05
83
4.96
1.00
Australia
142
5.25
1.06
141 5.33
1.03
141
5.72
1.04
105
5.61
1.13
H. K., China
199
5.72
1.15
198 5.59
1.08
197
6.15
1.11
158
5.68
1.14
Korea
334
5.02
1.01
327 5.15
1.00
327
5.58
1.01
285
5.73
1.15
151
4.96
1.00
149
1.00
149
5.52
1.00
118
4.97
1.00
Average
5.17
Note:
1. S (Sample Size), AV (Absolute Value). RV (Relative Value)
2. Range for AV: 1 - 7 (i.e. 1: highest barriers, 7: lowest barriers)
3. RV = AV/Average across all economies
5
1st Step: Scenario Building
(Scenario I)
Implementation of Busan Business
Agenda
▪ 5% reduction in trade transaction cost by 2010
(Scenario II)
Differentiate the target rate
▪ 7.5% reduction for the developed economies by 2010
▪ 5% reduction for the developing economies by 2010
(Scenario III)
Implementation of TFAP 1
▪ Successful implementation of the Trade Facilitation
Action Plan 1 (base year 2005) by all member
economies
(Scenario IV)
Implementation of average rate of
completion
▪ Implement up to an average level of completion in 4
major areas reported in TFAP 1
▪ Each economy set target level corresponding to its
stage of development (developing/developed)
Note: Scenario 3 and 4 is based on “Trade Facilitation Actions Measures” in Table4 of the paper.
2nd Step: Estimating Gravity Equation
Steps
1st step
2nd step
Method
The survey
targeting Korea’s
exporting firms is
conducted on trade
facilitation.
- The relationship between trade facilitation
(using
Trade Facilitation Index) and trade volume
within the
Gravity Equation is
Empirically
estimated.
3rd step
Chain Rule Approach
4th step
CGE Analysis
6
Gravity Model Estimation
In(IMijt)=β0+ β1InGDPit+ β2 InGDPjt
+ β3InPopit+ β4InPopjt
+ β5InDistij+ β6In(AreaiAreaj)
+ β7Borderij+ β8Languageijt
+ β9RTAijt+ β10InTariffit
+β11InCPijt+ β12InSCijt
+ β13InBMijt
+ β14InECijt+δYEARt+εijt
i and j :APEC economies, t: year
Imijt : import from economy j to economy i in year t
GDP: Gross Domestic Product
Dist: Distance between economy i and j
Area: Area of each economy
Border: 1(i and j share the border) otherwise 0
Language: 1(i and j use the same language)
otherwise 0
RTAijt: 1(i and j belong to the same RTA otherwise 0)
Tariff: Import tariff rate
CP: Trade facilitation index for Customs procedures
SC: Trade facilitation index for Standards and
Conformity
BM: Trade facilitation index for Business Mobility
EC: Trade facilitation index for E-commerce
Year: Year
Gravity Model Estimation (Cont’d)
(1)
(2)
(3)
(4)
0.622
0.622
0.622
0.622
(exporting economy)
(0.021)***
(0.021)***
(0.021)***
(0.021)***
Log of GDP
(importing economy)
0.247
(0.025)***
0.253
(0.025)***
0.254
(0.025)***
0.239
(0.025)***
Log of Population
(exporting economy)
0.063
(0.052)
0.064
(0.052)
0.064
(0.052)
0.064
(0.052)
Dependent Variable: log(Import)
Log of GDP
Log of Population
0.539
0.515
0.515
0.532
(importing economy)
(0.055)***
(0.055)***
(0.054)***
(0.055)***
Log of Distance
-0.946
(0.089)***
-0.952
(0.089)***
-0.941
(0.089)***
-0.943
(0.089)***
Log of the multiplication of
Area i and Area j
Border Dummy
Language Dummy
-0.158
-0.159
-0.159
-0.159
(0.023)***
(0.023)***
(0.023)***
(0.023)***
0.655
0.637
0.672
0.681
(0.304)**
(0.304)**
(0.304)**
(0.303)**
0.560
0.558
0.569
0.540
(0.183)***
(0.184)***
(0.184)***
(0.184)***
7
Gravity Model Estimation (Cont’d)
RTA Dummy
Tariff Rate
CP (Customs Procedure)
0.161
(0.043)***
0.162
(0.043)***
0.163
(0.043)***
0.160
(0.043)***
-0.060
-0.060
-0.060
-0.058
(0.030)**
(0.030)**
(0.030)**
(0.030)*
0.837
(0.047)***
0.824
(0.047)***
SC (Standards and Conformity)
0.822
(0.047)***
BM (Business Mobility)
0.857
EC (E-commerce)
(0.047)***
Number of Observation
3,539
3,539
3,539
3,539
R2
0.72
0.72
0.72
0.73
Note) *, **, *** indicate significance at the 10%, 5%, and 1% level, respectively.
3rd Step: Chain Rule Approach
Steps
1st step
Method
The survey
targeting Korea’s
exporting firms is
conducted on trade
facilitation.
2nd step
Trade Facilitation Index) and trade volume within the
Gravity Equation is
Empirically
estimated.
3rd step
- The functional relationship between important Chain Rule Approach
variables that determine trade volume is
identified
4th step
CGE Analysis
8
∂TC
∂Dist
Chain Rule Analysis
∂TC
∂IM ∂Dist ∂TC
=
⋅
⋅
∂Tariff ∂Tariff ∂IM ∂Dist
( 2)
=
⋅
⋅
∂CP ∂CP ∂IM ∂Dist
(3)
=
⋅
⋅
∂SC ∂SC ∂IM ∂Dist
∂TC
∂IM ∂Dist ∂TC
=
⋅
⋅
∂BM ∂BM ∂IM ∂Dist
⋅
⋅
=
∂EC ∂EC ∂IM ∂Dist
Results;

( 4)

(5)

(6 )
Tariff Elasticity for Trade Transaction
Costs = -0.01259
CP(Customs Procedure) Elasticity for
Trade Transaction Costs = -0.17696
SC(Standards and Conformity) Elasticity
for Trade Transaction Costs = -0.17311
BM(Business Mobility) Elasticity for Trade
Transaction Costs = -0.17471
ICT(Information and Communications
Technology) Elasticity for Trade
Transaction Costs = -0.18176
The coefficient estimates are presented
in Table 3. The value for ∂TC is assumed
∂Dist
to be 0.2 as in Kim et. al (2005)
4th Step: CGE Analysis
Steps
1st step
Method
The survey
targeting Korea’s
exporting firms is
conducted on trade
facilitation.
2nd step
Trade Facilitation Index) and trade volume within the
Gravity Equation is
Empirically
estimated.
3rd step
Chain Rule Approach
4th step
- Economic impacts of trade facilitation is
examined. (Implementation Measures for Trade
Facilitation Action are used, Table 4)
CGE Analysis
9
CGE Analysis
1. δ(>1) : transaction cost of 1 unit
P·δ : the price of an imported product
2.
=
*
irs
P =
4. The change in total import volume and
import growth rate for good i
dQis dQirs dδ irs
dP
dδ
dP
=
−
+ σ im ( irs + irs − is )
δ irs
Qis
Qirs
Pirs
δ irs
Pis
δ ⋅ Pirs ⋅ δ > 1
- effective price of good i, economy s
imports from economy r = P*irs
- export price = Pirs
3. The initial equilibrium δ=1, the price
and quantity expressed separately
*
Qirs
= Qirs ⋅
1
δ
dPis
dP
dδ
= ∑ θ iks ( iks + irs )
δ irs
Pis
Piks
k
Pis = total price
Qis = total import volume for good i
Q* irs= effective quantity of imports
σim , θiks =cross-elasticity between
import goods and the import proportion
of economy k
CGE Analysis: Result (1)
<Effects of Trade Facilitation on GDP>
(Unit:%)
Notes)
In Option 3, the average value of developed
economies of APEC is applied to US data.
For Philippines, the 2004 data is used instead.
For Peru, the average value of developing
economies of APEC is applied for e-commerce.
Scenario I
Scenario II
Scenario III
Scenario IV
Republic of Korea
2.07
3.09
0.42
1.10
Japan
0.45
0.67
0.16
0.23
China
1.45
1.47
0.58
1.43
United States
0.60
0.90
0.35
0.31
Canada
1.61
2.40
1.66
0.84
0.54
Australia
1.03
1.54
1.00
New Zealand
1.48
2.20
0.74
0.78
Indonesia
1.34
1.34
0.57
1.33
Malaysia
3.98
3.99
4.52
3.96
Philippines
3.42
3.45
5.34
3.37
Singapore
7.11
10.67
0.84
3.73
Thailand
2.90
2.90
3.72
2.89
1.93
Chinese Taipei
1.94
1.94
1.50
Hong Kong
2.92
4.36
2.93
1.53
Vietnam
3.09
3.10
0.92
3.08
Mexico
1.20
1.19
1.96
1.20
Chile
1.48
1.48
1.58
1.47
Russia
1.16
1.15
2.17
1.16
Peru
0.91
0.92
0.73
0.90
10
<Effects of Trade Facilitation on Welfare>
(Unit:%)
Notes)
Scenario I
Scenario II
Scenario III
Scenario IV
Republic of Korea
2.45
3.63
0.53
1.32
Japan
0.50
0.75
0.16
0.26
China
1.58
1.70
0.64
1.45
United States
0.52
0.78
0.31
0.28
Canada
2.10
3.13
1.97
1.11
0.70
Australia
1.28
1.89
1.19
New Zealand
2.00
2.94
1.06
1.09
Indonesia
1.59
1.67
0.70
1.51
Malaysia
6.92
7.42
6.95
6.41
Philippines
4.08
4.31
5.96
3.83
Singapore
8.27
12.14
1.56
4.58
Thailand
3.79
3.96
4.52
3.61
2.13
Chinese Taipei
2.26
2.39
1.66
Hong Kong
3.80
5.47
3.49
2.20
Vietnam
4.25
4.34
1.40
4.15
Mexico
1.56
1.70
2.25
1.42
Chile
1.86
1.94
1.89
1.77
Russia
1.39
1.41
2.52
1.36
Peru
1.01
1.05
0.80
0.97
<Effects of Trade Facilitation on Exports>
(Unit:%)
Notes)
Scenario I
Scenario II
Scenario III
Scenario IV
Republic of Korea
3.07
4.58
0.70
1.61
Japan
4.55
6.48
2.32
2.69
China
5.99
6.41
2.50
5.56
United States
7.28
10.61
4.55
4.06
Canada
3.27
4.94
2.93
1.67
Australia
1.30
1.89
1.10
0.71
New Zealand
1.19
1.75
0.65
0.65
Indonesia
2.73
2.90
1.14
2.55
Malaysia
2.13
2.25
2.20
2.01
Philippines
5.72
6.12
8.53
5.31
Singapore
7.51
11.12
1.04
4.02
Thailand
2.49
2.65
2.87
2.32
Chinese Taipei
4.00
4.23
2.94
3.76
Hong Kong
1.58
2.30
1.48
0.89
Vietnam
0.37
0.62
0.18
0.13
Mexico
2.78
3.21
3.67
2.36
Chile
1.21
1.29
1.22
1.14
Russia
1.72
1.92
2.57
1.52
Peru
4.57
5.06
3.54
4.10
11
Policy Implications
Policy Implication 1
Implementation of trade facilitation objective set out in Busan
Roadmap will result in relatively great effects across the economies,
in terms of increase in GDP, welfare and export.
Ö Hence, APEC member economies should more actively promote
trade facilitation as a primary means to achieve the Bogor Goals.
Policy Implications (Cont’d)
For the greatest economic benefits, Option II should be the base of
the concrete action plans provided that APEC developed economies
reach consensus on the additional reduction in transaction cost by
50%. (5%->7.5%)
12
Especially, in shift from Option 1 to Option 2, it is found that most
gains resulting from further reduction in trade transaction costs by
developed economies (assumed to participate the pathfinder initiative
at the outset) are distributed to those who participate whereas gains
for developing economies are very small.
Hence, this implies that free-rider problem is not prevalent in
improvement in trade facilitation in that the improvement is made
through structural reform, de-regulation and enhancing transparency,
which improve the economies’ own economic strength.
Even if the APEC’s current trade facilitation implementation programs
in all 97 specific fields of the 4 major areas are carried out, the goal
of making a 5% reduction in trade transaction costs is likely to be
very unrealistic.
¾
The gains from fully implementing the existing trade facilitation action plans
based on member economies’ commitment (option III) are less than the gains
from achieving the explicit goal (option I, 5% reduction).
13
Ö In this regard, there is an immediate need for better and more
extensive quantitative reporting mechanism.
Ö Also, it is suggested that implementation of modality of TFAP
including the expansion of the scale of its 4 major areas should be
expanded into all areas of trade facilitation.
Ö It is also recommended that new reporting mechanism should be
more focused on the areas targeted for improvement and the
measures to be used in assessing progress.
To maximize the economic effects of trade facilitation, individual
member economies must set up and develop their own strategies to
promote trade facilitation according to their comparative advantage in
policy environments and national development strategies.
Ö Recommend to prepare “APEC Trade Facilitation Best Practice
Guidebook”
14
APEC needs to set up “APEC Trade Facilitation Peer Review
Mechanism” to overview the whole of APEC approach to trade
facilitation as well as the progress of the newly developed TFAP 2.
Peer Review Mechanism should include modality evaluating
performance rather than commitment.
Ö Developed economies to complete the review by 2008
Ö Developing economies com complete the review by 2009
Policy Implications 7
As most trade facilitation activities require huge amounts of fixed
capital associated with modern technology, there is an immediate
need to enhance capacity building for developing economies.
Ö It is highly recommended that APEC launch joint programs with IFIs,
international financial institutes, such as the World Bank and the Asia
Development Bank, as well as with other international organizations
interested in trade facilitation reform such as the OECD and
UNCTAD.
15
Policy Implications 8
Ö It is suggested to construct “Trade Facilitation Index” based on
APEC-wide survey targeting exporting firms of all APEC economies.
Thank You!
16