Trade facilitation is associated with the reduction of at-the-border transaction costs other than tariffs, and involves the simplification and standardization of customs formalities and administrative procedures related to international trade. In the past few years there has been renewed interest in trade costs and trade facilitation for two main reasons. The first is that today’s international trade landscape is increasingly characterized by global value chains that span national boundaries. The rise of global value chains and trade in intermediate inputs is connected to the decreases in traditional tariff barriers across all countries. Now the focus has moved to reducing costs of trade elsewhere. The second reason is the realization that trade liberalization has not had the expected positive impact on developing countries’ exports, leading analysts to emphasize the need to reduce trade costs, by enabling and financing trade facilitation reforms. These efforts have coalesced around global aid-for-trade initiatives which are part of the Doha Development Round of the World Trade Organization (WTO). This chapter presents an overview of key concepts, analytical and conceptual frameworks explaining trade facilitation and aid-for-trade efforts. It also provides a survey of the empirical literature, with particular attention on the proposed gains from implementing trade facilitation reform in areas of: customs procedures and border protection, transport and transit costs, information and communications technology, and the role of product standards and technical regulations on trade flows. The chapter concludes with a discussion of policy priorities for developing countries moving forward.
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