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GTAP Resource #2265

"Trade Costs in South Asia"
by Sharma, Pooja

The paper examines the excessive direct costs and time taken in crossing borders in South Asia and assesses the implications for trade from increased efficiency of cross-border transactions. The estimates of monetary costs and time have been derived from existing field research undertaken in the region in recent years. These estimates are taken as measures of border inefficiencies in trade amongst South Asian countries. We employ the standard GTAP modeling framework and database (Version 6) to estimate the trade and welfare costs of inefficiencies in cross-border trade transactions among the South Asian economies and compare these costs with those resulting from trade policy barriers. The removal of transactions costs is simulated as output augmenting technical change for the relevant sectors and trade flows. We find that the removal of such inefficiencies in trade transactions would increase welfare in the region by about $116 million per year as compared to a gain in income of $418 million from a preferential removal of trade tariffs in the region. However, it is worthwhile to note that the gains accruing to some smaller countries in the region are much larger from removal of transactions inefficiencies than those from tariff policy liberalization. For instance, Bangladesh, which tends to suffer a loss in income from trade policy liberalization, is found to be the biggest beneficiary of increased efficiency of trade transactions. Also, the nondiscriminatory nature of transaction cost improvements leaves the rest of the world better off. The results underscore the importance of implementing reforms in border infrastructure and logistics in tandem with other policy reforms to enhance the political and economic viability of regional agreements.

Resource Details (Export Citation) GTAP Keywords
Category: Pakistan Conference Paper
Status: Published
Date: 2007
Created: Sharma, P. (2/21/2007)
Updated: Batta, G. (3/5/2007)
Visits: 1,679
No keywords have been specified.

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