How Does Trade Facilitation Affect International Trade?

This article evaluates the effect of different aspects of trade facilitation in developed and developing countries on bilateral trade through an augmented gravity model and uses the latter to estimate ad valorem equivalents (AVEs) of administrative bathers to trade. The results show that a multitude of trade facilitation variables including internet, bureaucracy, corruption and geography affect the transaction times to import and to export. However, the time to import has a higher negative impact on trade when compared with the time to export. Another important finding is that both facilitation and liberalization of trade are complements rather than substitutes. Finally, when sectoral characteristics are taken into account, some perishable, seasonal and high-value-added products appear to be more sensitive to transaction time than other products. These results are also confirmed by the values of the AVEs.