Trade Facilitation

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Trade Facilitation Expanding the Benefits of
Trade to SMEs

• Yue Li
• John S. Wilson
• The World Bank
• Beijing, China
• May 20, 2009

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Roadmap

• Introduction Preview of Results
• Trade Facilitation and SMEs Exports
• Perception
• Impact
• Concluding Remarks

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World Exports Contract Sharply
Source World Bank, DEC Prospects Group.
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Why Trade Facilitation

• Trade costs serious short and long term
  constraints
• Tariffs relatively low, multilateral
• Trade facilitation unilateral, regional
• Recovery requires addressing these barriers now
• TF can involve substantial resource costs.
  Countries need to identify priorities.

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Why Firm-level Study

• Firms are the actual players in export
  activities. Important to understand their
  behavior and what affect their companies.
• Existing empirical studies largely focus on
  aggregate impacts of reform due to data
  availability.
• Using the World Bank Enterprises Surveys, the
  study extends the scope of empirical literature
  to firm dimension with a focus on SMEs in Asia
  countries

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Preview of Results

• Improvement in TF indicators increase the
  probability that SMEs will become exporter -- as
  well as their export propensity
• Policy predictability IT services the most
  effective
• SMEs are less responsive to improvement in
  transportation infrastructure than large
  enterprises while increasing policy
  predictability matters more to SMEs

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Trade Facilitation SMEs Exports

• Using Firm Level Data from Enterprise Surveys
• 10 East and Southeast Asian countries and 4 South
  Asian countries
• 14 sectors, 2002-2006
• 5000-14000 firm observations
• SMEs 60 , exporters 36
• Examine Trade Facilitation Indicators and Firms
• Probability of Exporting (Probit Model)
• Exports Propensity (Exports/Sales, Tobit Model)

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Exporters are Larger(Sales)
Data Source Enterprise Survey, the World Bank
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Exporters are More Productive(Sales/Labor)
Data Source Enterprise Survey, the World Bank
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Measuring Facilitation

• Narrow sense
• Logistics of moving goods through ports
• Efficient custom rules for cross-border trade
• Broader sense
• Environment in which trade transaction take place
• transparency of regulation, harmonization of
  standards, IT services and transportation
  infrastructure.

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Measuring FacilitationEnterprise Surveys

• Narrow sense
• Days to clear exports from port of exit
• Days to clear imports from port of entry
• Customs trade regulation as an obstacle to
  business

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Measuring Facilitation Enterprise Surveys

• Transparency
• Corruption as an obstacle to business
• Economic regulatory policy uncertainty as an
  obstacle to business
• Confidence in legal protection
• Infrastructure
• Transportation as an obstacle to business
• Telecommunication as an obstacle to business
• Affordability quality of IT services

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SMEs Perception ( firms, obstacles to business)
Data Source Enterprise Survey, the World Bank
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SMEs Customs Regulation
Data Source Enterprise Survey, the World Bank
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SMEs Policy Uncertainty
Data Source Enterprise Survey, the World Bank
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Trade Facilitation SMEs Exports

• Due to higher costs and risks, only the most
  productive firms exports. (Melitz 2003)
• TF promotes the entry of SMEs into export
  marketsHigher Probability of Exporting
• More firms in direct contact with the global
  market
• Lower trade costs increase firms propensity to
  export and stimulate the growth of exporters.
• Reallocation of resources to high-productivity
  firms

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Impact Probability of Exporting
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Impact Export Propensity
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Concluding Remarks

• Trade facilitation can expand the benefits of
  trade to SMEs through
• raising the probability of entering foreign
  markets
• increasing export propensity of existing
  exporters

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Concluding Remarks

• More substantial investments in reform in
  particular in the soft part of trade
  facilitation
• Reducing uncertainty, increasing transparency
• Improving IT services infrastructure

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Thank You

• Yue Li
• John S. Wilson
• The World Bank
• http//econ.worldbank.org/projects/trade_costs