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Evidence indicates that trade costs are a much more substantial barrier to trade than tariffs are, especially in Sub-Saharan Africa. This paper decomposes trade costs into: (i) trade facilitation, (ii) non-tariff barriers, and (iii) the costs of business services. The paper assesses the poverty and shared prosperity impacts of deep integration to reduce these three types of trade costs in: (i) the East African Customs Union–Common Market of East and Southern Africa–South African Development Community "Tripartite" Free Trade Area; (ii) within the East African Customs Union; and (iii) unilaterally by the East African Customs Union. The analysis employs an innovative, multi-region computable general equilibrium model to estimate the changes in the macroeconomic variables that impact poverty and shared prosperity. The model estimates are used in the Global Income Distribution Dynamics microsimulation model to obtain assessments of the changes in the poverty headcount and shared prosperity for each of the simulations for the six African regions or countries. The paper finds that these reforms are pro-poor. There are significant reductions in the poverty headcount and the percentage of the population living in poverty for all six of the African regions from deep integration in the Tripartite Free Trade Area or comparable unilateral reforms by the East African Customs Union. Further, the incomes of the bottom 40 percent of the populations noticeably increase in all countries or regions that are engaged in the trade reforms. The reason for the poor share in prosperity is the fact that the reforms increase unskilled wages faster than the rewards of other factors of production, as the reforms tend to favor agriculture. Despite the uniform increases in income for the poorest 40 percent, there are some cases where the share of income captured by the poorest 40 percent of the population decreases. The estimated gains vary considerably across countries and reforms. Thus, countries would have an interest in negotiating for different reforms in different agreements.

Despite strong economic growth since 2000, Moldova remains one of the poorest countries in the region. Excessive reliance on remittances, export dependency on a few products, and insufficient domestic job creation make the Moldovan economy highly vulnerable to external conditions. As a small and open economy, Moldova’s development potential is linked to its trade and investment integration strategy. Moldova is situated between two large markets: the European Union (EU), which absorbs more than half of Moldova’s exports, and the Russian Federation. Reducing the economic distance to large regional markets and reaping the benefits of openness is key to overcoming Moldova's structural constraints and spurring export-led growth. The objective of the Moldova Trade Study is to contribute to a better understanding of the factors and challenges underlying Moldova’s foreign trade performance and to identify policy interventions that can enhance the competitiveness of Moldova’s exporting firms and the value added of their exports. . The rest of the note is structured as follows: (ii) section two summarizes the analysis of Moldova’s export performance; (iii) section three focuses on constraints on Moldova’s competitiveness; (iv) in section four, the authors consider alternative trade policy scenarios and their implications for the Moldovan economy; (v) section five synthetizes existing analysis on constraints for agriculture competitiveness and exports, while section six evaluates the performance of free economic zones in Moldova. In the final section, the authors present policy recommendations

This paper analyzes the likely impact of European preferences, in particular of its Rules of Origin (RoO), on the prospects for integration of West Africa in world trade. We show that West African trade has not yet achieved the structural transformation of countries having successfully established themselves as manufacturing assembly platforms. EU RoO are complex, restrictive and discriminatory, hampering this integration of African producers in world trade. The paper explores the consequences of moving to a single product-specific RoO which would allow a maximum foreign content (MFC) to satisfy the substantial transformation criterion. We suggest that the developmental objective of the EPAs would be satisfied with a MFC of 90%-95% for LDCs and a 60%-70% for non-LDCs. Such a differentiated treatment should allow the small african companies in West Africa to enter into cross-border production chains. With such a move, the EU would also “seize the agenda” in the much awaited move towards multilateralization of preferential RoO.

Moldova’s recent Association Agreement with the European Union (EU), which includes a Deep and Comprehensive Free Trade Agreement (DCFTA), represents an important opportunity, as well as challenges. This analytical document has been commissioned by the World Bank Group to provide insights into potential outcomes of the DCFTA and of other trade options that Moldova has, using a Dynamic Computable General Equilibrium (DCGE) model calibrated to its economy. This paper begins by describing the general trends in economic relations between Moldova and the EU over the past 10 years, with an emphasis on trade, as well as Foreign direct investment (FDI) and labor migration. This section includes some additional facts and details that complement the Trade Competitiveness Diagnostic. In the second section, the paper presents the main elements of the DCFTA and highlights the trade commitments and concessions that the EU and Moldova undertook. It also includes a short review of available literature on the ex-ante or ex post impact assessments of other Association Agreements between the EU and third countries that have been done using CGE models. The third section presents key features of the DCGE and discusses the data used for assembling the Social Accounting Matrix (SAM). Then, the main features of the simulated trade scenarios are presented. Finally, this paper discusses the DCGE simulation results, including the effects of the various scenarios on welfare, trade, and economic activity level. Some distributional impacts are also brought into discussion. The final section concludes and makes several recommendations.

How do global supply chain linkages modify countries' incentives to impose import protection? Are these linkages empirically important determinants of trade policy? To address these questions, this paper introduces supply chain linkages into a workhorse terms-of-trade model of trade policy with political economy. Theory predicts that discretionary final goods tariffs will be decreasing in the domestic content of foreign-produced final goods. Provided foreign political interests are not too strong, final goods tariffs will also be decreasing in the foreign content of domestically-produced final goods. The paper tests these predictions using newly assembled data on bilateral applied tariffs, temporary trade barriers, and value-added contents for 14 major economies over the 1995-2009 period. There is strong support for the empirical predictions of the model. The results imply that global supply chains matter for trade policy, both in principle and in practice.

This paper argues that the contribution of trade preferences to economic development needs to be reappraised in light of the growth of globalised trade in manufactures. Trade preferences may be able to act as a catalyst for manufacturing exports, leading to rapid growth in exports and employment. To do so, preferences need to be designed to be consistent with international trade in fragmented ‘tasks’ (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs such as skills and infrastructure. Recent experience with the African Growth and Opportunities Act shows that, in the right conditions, Sub-Saharan African countries have had large manufacturing export supply response to trade preferences.

This paper assesses the effects of reducing tariffs under the Doha Round on market access for developing countries. It shows that for many developing countries actual preferential access is less generous than it appears because of low product coverage or complex rules of origin. Thus, lowering tariffs under the multilateral system is likely to lead to a net increase in market access for many developing countries, with gains in market access offsetting losses from preference erosion. Furthermore, comparing various tariff-cutting proposals, the research shows that the largest gains in market access are generated by higher tariff cuts in agriculture. IMF Staff Papers (2007) 54, 338–384. doi:10.1057/palgrave.imfsp.9450009

This background paper provides information on the study of the Group of 20 (G-20) and challenges faced by low-income developing countries (LIDCs). The study analyzes LIDCs development challenges and how G-20 economic policies can be coordinated so they can contribute to creating an enabling environment for their development. The focus of the paper is the role that trade and investment policies of G-20 countries play in this context. The paper is composed of three parts 1) the characteristics of LIDCs integration in the world economy, 2) the evolution of G-20 policies that affect LIDCs integration, and 3) the potential for changes in the G-20 trade and investment policy landscape to benefit LIDCs.

Economic activity in many African countries remains highly concentrated and exports are often dominated by mineral resources or a few primary products. The World Bank’s 2011 report on light manufacturing in Africa identified poor trade logistics performance as a constraint that especially penalized African exporters that relied on imported inputs, very often making them uncompetitive. The report highlighted research that demonstrated how poor logistics added roughly a 10 percent production cost penalty in Ethiopia, Tanzania, and Zambia across the five subsectors of light manufacturing where opportunities were identified as greatest in Africa. The report outlined how in Africa poor trade logistics increase production costs (often wiping out the labor cost advantage) and lead to long and unreliable delivery times, making local firm’s unattractive suppliers to lead firms in global value chains (GVCs), particularly for light manufacturing. This note seeks to contribute to a review of progress in achieving export diversification through greater exports of light manufacturing products. It looks at recent trends in the exports of the five categories of light manufacturing identified as having strong potential in Africa. The note reviews progress in improving trade logistics in Sub-Saharan Africa, with a focus on the three countries highlighted in the light manufacturing study: Ethiopia, Tanzania, and Zambia, and additionally Kenya and Uganda.

What affects a country's decision of whether to formally engage in a trade dispute directly related to its exporting interests? This article empirically examines determinants of affected country participation decisions in formal trade litigation arising under the World Trade Organization (WTO) between 1995 and 2000. It investigates determinants of nonparticipation and examines whether the incentives generated by the system's rules and procedures discourage active engagement in dispute settlement by developing country members in particular. Though the size of exports at stake is found to be an important economic determinant affecting the decision to participate in challenges to a WTO-inconsistent policy, the evidence also shows that measures of a country's retaliatory and legal capacity as well as its international political economy relationships matter. These results are consistent with the hypothesis of an implicit 'institutional bias' generated by the system's rules and incentives that particularly affects developing economy participation in dispute settlement.

Although average Organisation for Economic Co-operation and Development (OECD) tariffs on imports from the least developed countries are very low; tariffs above 15 percent have a disproportional effect on their exports. Products subject to tariff peaks tend to be heavily concentrated in agriculture and food products and labor intensive sectors, such as apparel and footwear. Although the least developed countries benefit from preferential access, preferences tend to be smallest for tariff peak products. A major exception is the European Union, so that the recent European initiative to grant full duty free and quota free access for the least developed countries will result in only a small increase in their exports of tariff peak items. However, as preferences are less significant in other major OECD countries, a more general emulation of the European Union initiative would increase the least developed countries total exports of peak products by US dollar 2.5 billion. Although almost half of this increase is at the expense of other developing country exports, this represents less than 0.05 percent of their total exports. This trade diversion can be avoided by reducing tariff peaks to a uniform 5 percent applied on a nondiscriminatory basis. However, such a reform would imply no gains for the least developed countries, suggesting that the globally welfare superior policy of nondiscriminatory elimination of tariff peaks should be complemented by greater direct assistance to poor countries.

The Central America region is a small market. The region contains around 43 million inhabitants (0.6 percent of total world population) who generate around 0.25 percent of the world's Gross Domestic Product (GDP). While the region has successfully embarked on a regional integration agenda and has strong commercial links with the US, extra-regional trade-mainly with large fast-growing emerging economies-remains a challenge. Export performance is analyzed along three dimensions that, together, give a fairly comprehensive picture of competitiveness: 1) the composition, orientation and growth of the export basket; 2) the degree of export diversification across products and markets; and 3) the level of sophistication and quality of their main exports. This analysis allows exports dynamics at the different margins of trade (intensive, extensive, and quality) to be evaluated and individual countries' to be benchmarked with peers in the Central American region. The results of this report allow policy makers to identify key areas to explore in the overall discussion of export competitiveness in the Central American region. This paper relates to the literature on challenges and opportunities that trade liberalization can bring to the Central American region. Much of the recent literature focuses on the role of the free trade agreement negotiated by Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, with the US.

One of the basic features of the recent international scenario is the increasing importance of a few emerging economies. In this paper we map the import tariffs imposed by each of the BRICS on the products from its neighboring countries, as well as the tariffs imposed on Brazilian products. We aim at identifying whether the conditions met by Brazilian products on their access to the markets of the other BRICS and to their neighbors are different from the conditions provided by each BRIC to its neighbors as well as to those each BRIC meets on its neighboring markets.

Lack of integration into the global economy is a major factor in the continued underdevelopment of the poorest countries. The reasons for this include obstacles faced by exporters both abroad and at home: access to foreign markets is frequently limited by import barriers, while inadequate infrastructure and weak policies at home - including their own trade policies - often frustrate producers seeking to compete abroad.With many low-income countries (LICs) lagging in the global effort to reach the Millennium Development Goals (MDGs), there are calls for intensified action to spur growth and development. Trade is one key area where action can be taken. This paper suggests possible actions to foster trade integration for the LICs, substantially increasing their export potential and thereby helping them to progress toward the Millennium Development Goals.As the foundation for these ambitions, we emphasize the role of a secure, open global trading environment - strengthened further by concluding the WTO Doha Round. From this base, the poorest countries could also benefit from better trade preferences from the Advanced Market (AM) and major Emerging Market (EM) countries. Building the capacity to take advantage of trade opportunities will require support from the international community and policy reforms - including to their own trade regimes - by the poorest countries themselves. The Fifteen Point Plan of possible actions outlined in this paper could increase annual exports of the least developed countries (LDCs) by US$10 billion or more, with additional benefits for other LICs.

Publication Inra prise en compte dans l'analyse bibliométrique des publications scientifiques mondiales sur les Fruits, les Légumes et la Pomme de terre. Période 2000-2012. http://prodinra.inra.fr/record/256699; This paper analyzes the access of Eastern and Southern Mediterranean countries to the EU fruit and vegetables market and provides a measure of the level of preferences from which they benefit. To take into account the complexity of EU protection in the F&V sector, in particular the seasonality of protection and the Entry Price System, we conducted our analysis at a very disaggregated level (eight digits of the nomenclature, monthly data). We showed that, on average, Mediterranean countries do have significant preferences compared to other countries exporting to the EU. However, the magnitude of the preferences differs among countries; Morocco has the highest preference, while Syria and Israel have the lowest. We simulated a multilateral reduction in the MFN tariffs (as planned in the Doha Round) and showed that this would reduce the heterogeneity within the zone by more strongly eroding the preferences of the most advantaged countries. The classification of Entry Price products as sensitive products would either benefit or have no effect on most Mediterranean countries.; Cet article porte sur l’accès au marché européen des exportations de fruits et légumes en provenance des pays de l’est et de sud de la méditerranée, sur les droits de douane auxquels font face ces pays et sur la mesure des préférences dont ils bénéficient. Afin de prendre en compte la complexité de la protection européenne dans le secteur des fruits et légumes, en particulier la saisonnalité de la protection et le Système de Prix d’Entrée, l’analyse a été menée à un niveau très désagrégé (données mensuelles, au niveau produit). Les auteurs montrent qu’en moyenne les pays méditerranéens ont des préférences nettement plus importantes que les autres pays qui exportent vers l’Union Européenne. La situation des pays méditerranéens est cependant hétérogène, le Maroc ayant les préférences les plus élevées, la Syrie et Israël les plus faibles. Les auteurs simulent l’impact d’une libéralisation multilatérale (tel qu’envisagée dans les négociations OMC en cours) et les auteurs montrent qu’une telle libéralisation aurait pour effet de réduire l’hétérogénéité des préférences dans la région méditerranéenne en provoquant une érosion des préférences pour les pays actuellement le plus avantagés. Le classement des produits à prix d’entrée en produits sensibles n’aurait pas d’effet négatif sur les marges préférentiels des pays méditerranéens.

While diversification of exports is often a desirable trade objective, it is far from clear how best to tap into new opportunities. This paper discusses the range of avenues of diversification, including (i) expanding the range of markets into which existing products are sold (geographic diversification); (ii) upgrading the value of existing products, including agricultural exports (quality diversification); and (iii) taking advantage of opportunities to expand non-merchandise exports (services diversification), in addition to introducing entirely new export products. All offer opportunities for cost?effective positive policies relating to the incentive regime, backbone services, and export support institutions.

The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows multilateral trade liberalization. Recent theoretical and empirical evidence indicates that this is the case even for unilateral preferences that developed countries provide to small and poor countries, but there is no estimate of the resulting welfare costs. This stumbling block effect can be avoided by replacing the unilateral preferences with a fixed import subsidy, which generates a Pareto improvement. More importantly, this paper presents the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. Recent estimates of the stumbling block effect of preferences with data for 170 countries and more than 5,000 products are used to calculate the welfare effects of the European Union, Japan, and the United States switching from unilateral preferences for least developed countries to an import subsidy scheme. In a model with no dynamic gains to trade, the switch produces an annual net welfare gain for the 170 countries that adds about 10 percent to the estimated trade liberalization gains in the Doha Round. It also generates gains for each group: the European Union, Japan, and the United States ($2,934 million), least developed countries ($520 million), and the rest of the world ($900 million).

The North American Free Trade Agreement (NAFTA) is arguably the first case study of what may be expected from the increasing number of preferential trade agreements involving both developed and developing economies. Ten years after the treaty's inception, it is time to assess how its outcomes compare with initial expectations. The articles in this symposium issue provide insights into the effects of NAFTA on economic geography, trade, wages and migration, and foreign investment from Mexico's perspective. The contributions paint a complex post-NAFTA reality characterized by persistent intra-bloc trade barriers, interregional inequality within Mexico, labor market outcomes that seem closely tied to migration patterns and international trade and investment, and foreign investment flows that appear weakly related to trade agreements.

The effective market access granted to textiles and apparel under the North American Free Trade Agreement (NAFTA) is estimated, taking into account the presence of rules of origin. First, estimates are provided of the effect of tariff preferences combined with rules of origin on the border prices of Mexican final goods exported to the United States (U.S.) and of U.S. intermediate goods exported to Mexico, based on eight-digit harmonized system tariff-line data. A third of the estimated rise in the border price of Mexican apparel products is found to compensate for the cost of complying with NAFTA's rules of origin, and NAFTA is found to have raised the price of U.S. intermediate goods exported to Mexico by around 12 percent, with downstream rules of origin accounting for a third of that increase. Second, simulations are used to estimate welfare gains for Mexican exporters from preferential market access under NAFTA. The presence of rules of origin is found to approximately halve these gains.

This article assesses the impact of the world price-depressing effect of agricultural subsidies and border protection in Organization for Economic Co-operation and Development (OECD) countries on developing economies' exports, imports, and welfare. Developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers, whereas net importers may lose as world prices rise. A simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities. Simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies' exports and welfare than a 50 percent reduction in agricultural subsidies. Although there is significant heterogeneity across developing economies, the results suggest that efforts in the Doha round of World Trade Organization (WTO) negotiations should be directed at substantially reducing border protection.

This report draws on a body of existing literature to assess the impact of trade preferences granted by the European Union on trade and welfare in developing countries. It is argued that the Everything But Arms amendment to the EU preference scheme will have limited effect on export potential and welfare in the least developed countries (LDCs). The EU would do well to simplify compliance with their rules of origin. When LDCs are granted deeper preferences under continued domestic agricultural policies in the EU, US, Canada and Japan, resources in LDCs will move towards the agricultural sector. The expected effect impact on LDCs of extending preferences to non-LDCs is quite small, while the negative effect of reductions of MFN tariffs under trade liberalisation is stronger.

This report draws on a body of existing literature to assess the impact of trade preferences granted by the European Union on trade and welfare in developing countries. It is argued that the Everything But Arms amendment to the EU preference scheme will have limited effect on export potential and welfare in the least developed countries (LDCs). The EU would do well to simplify compliance with their rules of origin. When LDCs are granted deeper preferences under continued domestic agricultural policies in the EU, US, Canada and Japan, resources in LDCs will move towards the agricultural sector. The expected effect impact on LDCs of extending preferences to non-LDCs is quite small, while the negative effect of reductions of MFN tariffs under trade liberalisation is stronger.