The Arab Republic of Egypt is yet to meet its exports potential, which has been historically hampered by several domestic market distortions and multiple barriers, resulting in weak export performance and modest regional and global integration.
... See More + Although the liberalization of the exchange rate in November 2016 was a necessary step to correct the exchange rate misalignment and ease the ensuing shortages in foreign currency, it has not been sufficient to guarantee a notable improvement in export performance. This paper analyzes Egypt's exports along three dimensions that are key for export performance and future growth: (i) composition and relatedness of exported products; (ii) geographic and product concentration; and (iii) relatedness to globally traded products. The analysis suggests that Egypt continues to specialize in traditional areas of comparative advantage and limited value-added or is expanding toward products for which global demand is declining. The paper uses a gravity model to predict bilateral trade flows based on the economic size, geographic distance, and other relevant characteristics that should typically contribute to facilitated trade and identify specific sectors and markets for which Egypt seems to have an untapped potential. To understand this underperformance, the paper investigates the key impediments to meeting the export potential. It explores some of the important supply and demand side factors and assesses the role of trade policy measures (tariffs and non-tariffs barriers) in impeding export growth. The analysis reveals that despite significant liberalization efforts, Egypt remains among the group of developing countries that have the highest frequency index and coverage ratio of non-tariff measures. Policy recommendations include a call to improve external competitiveness by fostering and diversifying domestic production and complement these efforts by engaging in trade facilitation reforms to remove the non-tariffs barriers to trade, notably, the administrative, technical, and sanitary barriers to trade. These are all necessary for the country to capitalize on its competitive gains from the currency depreciation and to improve the degree of Egypt's integration into global markets.
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Policy Research Working Paper WPS8809 APR 09, 2019
Around the world, trade has played a critical role in reducing poverty. Some of the most successful countries in East Asia, Europe, and North America owe much of their success to strong trade relations with their neighbors.
... See More + However, South Asian countries have yet to reap the benefits of proximity. Intraregional trade accounts for a little more than 5 percent of South Asia’s total trade, compared with 50 percent in East Asia and the Pacific and 22 percent in Sub-Saharan Africa.The World Bank’s recent report, A Glass Half Full: The Promise of Regional Trade in South Asia, clearly illustrates the gaps between current and potential trade in South Asia.The force of gravity—the degree of trade attraction between countries—is also manifest in high levels of informal trade. Informal trade has been estimated at 50 percent of formal trade in South Asia, aggregating assessments of various studies covering the 1993 to 2005 period.The large gaps between actual and potential trade arise because South Asian trade regimes discriminate against each other. This can be shown through an index of trade restrictiveness. Based on global trade data, such an index generates an implicit tariff that measures a country’s tariff and non-tariff barriers on imports. In India, Pakistan, and Sri Lanka, the index is two to nine times higher for imports from South Asia than from the rest of the world.Moreover, although the average burden of non-tariff measures may not appear high, it is high for specific product and market combinations in South Asia. It varies from over 75 percent to over 2,000 percent. Sri Lanka consistently appears on the list of product-market combinations with the highest trade restrictiveness index in the region. Barriers that have held back trade and investment within South Asia include tariffs and para tariffs, real and perceived non-tariff barriers, connectivity costs as manifested in the cost of air travel, and the broader trust deficit.
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Taking Stock: An update on Vietnam's recent economic developments, December 2018. Special focus: Facilitating Trade by Streamlining and Improving the Transparency of Non-Tariff Measures.
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Taking Stock: An update on Vietnam's recent economic developments, December 2018. Special focus: Facilitating Trade by Streamlining and Improving the Transparency of Non-Tariff Measures.
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One reason that poor people may not capture the full benefit from participation in international markets is that the goods they produce tend to be subject to relatively high trade barriers.
... See More + This paper analyzes market access barriers faced by households in different income deciles by matching household survey data from India based on the industrial classification of their economic activity. Tariffs in international markets are higher, and nontariff measures more numerous, on goods produced by poor workers than on goods produced by rich workers. Tariffs faced by exporters are higher on goods produced in rural and more remote areas than on those in urban centers, on goods produced by informal enterprises than by formal ones, and on goods produced by women than by men. Furthermore, the global reduction in tariffs from 1996 to 2012 failed to ameliorate these differences. How did we get there? Efforts to protect poor workers across countries resulted in a coordination problem. Indeed, tariff protection in China and the United States is higher on goods produced by poor workers than on goods produced by rich workers. Therefore, if poor workers are employed in similar sectors, then each country's attempts to protect its poor workers by imposing higher tariffs and more nontariff measures on such goods will reduce the access of all poor workers to international markets, and thus limit the gains from trade.
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Policy Research Working Paper WPS8609 OCT 10, 2018
This paper estimates the impacts on The Philippines of deep integration in a modern mega-preferential trade agreement, the Regional Comprehensive Economic Partnership.
... See More + The paper assesses how the results differ with three versions of market structure: (i) perfect competition, Armington style; (ii) monopolistic competition Krugman style; and heterogeneous firms, Melitz style. The paper develops a new numerical model of foreign direct investment with heterogeneous firms where firms produce in the host country and demand corresponds to the “proximity burden,” and is the first to apply a heterogeneous-firms model of foreign direct investment to preferential trade analysis. It also develops an extension of the Krugman model that allows small countries to impact the number of varieties. Both of these model extensions, as well as market structure, are crucial to the results. The trade and foreign direct investment responses are held constant across the three market structures. Lowering trade costs is examined from: (i) the reducing non-tariff barriers in goods; (ii) lowering barriers against foreign services providers, from foreign direct investment and cross-border; and (ii) facilitating trade. The results show that in all three market structures, there are substantial gains from deep integration, but virtually no gains from preferential tariff reduction. Both Krugman and Melitz style models produce significantly larger welfare gains than the Armington structure, especially in the impacts of foreign direct investment or with wider spillover effects on non- Regional Comprehensive Economic Partnership regions. The relationship between the welfare gains in the Krugman versus Melitz models is complex.
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Policy Research Working Paper WPS8587 SEP 17, 2018
The empirical case for trade as an engine of growth has now been established on solid empirical grounds. There has been a protracted controversy in the literature on the econometrics of trade and growth.
... See More + Nonetheless, most recent estimates suggest that a major episode of liberalization provides a permanent boost in growth on the order of 1 to 2 percent. Concomitantly, and largely on practical grounds, most low- and middle-income countries, with very few exceptions, have substantially lowered their trade barriers, eliminating the most egregious forms of trade protection (tariff peaks, quantitative restrictions, and other command-and-control instruments). Yet, by all accounts, trade costs remain high. Using an approach that consists of inverting the gravity equation and inferring trade costs from the relative size of external versus internal trade, Arvis and others (2013) and Novy (2013) show that trade costs have failed to fall as much for low-income countries as they have for others, reinforcing their economic ‘remoteness.’ Several multilateral initiatives have been set up to help low- and middle-income countries low-income ones, to integrate better in world trade. For instance, the Aid-for-Trade initiative was launched in 2005 to help low-income countries to cope with their Uruguay Round commitments, which were, in turn, expected to improve their ability to draw benefits from World Trade Organization (WTO) membership. More recently, the Trade Facilitation Agreement (TFA) signed in December 2013 in Bali and entered into force in February 2017, was designed to help low and middle-income countries to focus on reducing non-tariff barriers (NTBs) to trade such as border delays, cumbersome regulations, and so on. The TFA is expected to focus governments’ attention on the various aspects of trade facilitation, including some that go beyond the written mandate of the TFA. Some of those aspects are technical issues of border management, such as reducing delays, computerizing customs transactions, and streamlining verification and payment procedures. Some others are more genuinely economic, such as streamlining NTBs and improving regulatory design through cost-benefit analysis. This volume discusses some of the analytical methods that can be used to accompany this process. Chapter two discusses the broad economic rationale for improving the design of NTMs. Chapter three illustrates the main forms of quantifying NTMs and their effects, including inventory approaches, price-based approaches, and quantity-based approaches. It also proposes a new analytical and measurable concept of regulatory distance to help in guiding deep integration efforts at the regional level. Chapter four discusses the effects of NTMs on household expenditures, poverty, and firm competitiveness. Chapter five illustrates how analysis of NTMs can be used to inform policy advice. Chapter six concludes.
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