This paper estimates the relationship between trade facilitation and trade flows using a panel of disaggregated manufactured goods for the 2000–2001 period for 75 countries. Four categories of trade facilitation are defined, measured and assessed for their impact on bilateral trade flows using a gravity model. The four measures of trade facilitation are: port infrastructure (air and maritime), customs environment, regulatory environments and e‐business infrastructure. The results suggest that raising global capacity halfway to the world average in the four areas would increase trade by $377 billion. Most regions of the world increase exports more than imports. In large part, this result stems from increased exports to OECD markets that is obtained through a country's own effort to improve ports, customs, regulations and services infrastructures. In addition, the results suggest that reform and capacity building in trade facilitation in areas related to GATT Articles V, VIII and X that are under discussion at the World Trade Organisation could expand trade and exports significantly. Many of the reform measures necessary to achieve this goal need not necessarily require large‐scale investment projects, but rather action in legal and administrative reform to facilitate trade.

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This article analyzes the relationship between trade facilitation and trade flows in the Asia-Pacific region. Country-specific data for port efficiency, customs environment, regulatory environment, and e-business usage are used to construct indicators for measuring trade facilitation. The relationship between these indicators and trade flows is estimated using a gravity model that includes tariffs and other standard variables. Enhanced port efficiency has a large and positive effect on trade flows. Regulatory barriers deter trade. Improvements in customs and greater e-business use significantly expand trade but to a lesser degree than improvements in ports or regulations. The benefits of specific trade facilitation efforts are estimated by quantifying differential improvements in these four areas among members of the Asia Pacific Economic Cooperation (APEC). A scenario in which APEC members with below-average indicators improve capacity halfway to the average for all members shows that intra-APEC trade could increase by $254 billion, or 21 percent of intra-APEC trade flows. About half the increase is derived from improved port efficiency. Economic theory suggests a relatively direct and simple chain of causality: human development is enhanced through income growth; income growth is greater with more cross-border trade; trade is increased through trade facilitation efforts. Recent empirical work has focused on quantifying each of these links. The human development index is positively related to gross domestic product (GDP) per capita, and countries with a growing income have a higher GDP per capita. Though the positive relationship between trade and growth has come under scrutiny recently, there is no evidence that increased cross-border trade reduces income growth. The focus of this article is on the last (or perhaps first) link in the chain-the empirical relationship between trade facilitation and trade flows. Trade facilitation most often implies improving efficiency in administration and procedures, along with improving logistics at ports and customs. A broader

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors.

We estimate the impact of regulatory heterogeneity on agri‐food trade using a gravity analysis that relies on detailed data on non‐tariff measures (NTMs) collected by the NTM‐Impact project. The data cover a broad range of import requirements for agricultural and food products for the EU and nine of its major trade partners. We find that trade is significantly reduced when importing countries have stricter maximum residue limits (MRLs) for plant products than exporting countries. For most other measures, due to their qualitative nature, we were unable to infer whether the importer has stricter standards relative to the exporter, and we do not find a robust relationship between these measures and trade. Our findings suggest that, at least for some import standards, harmonising regulations will increase trade. We also conclude that tariff reductions remain an effective means to increase trade even when NTMs abound.

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How governments regulate food safety and countries. The results suggest that a 10 percent increase environmental protection, including pesticide residue in regulatory stringency-tighter restrictions on the levels, has important implications for trade. The World pesticide chlorpyrifos-leads to a decrease in banana Trade Organization (WTO) Ministerial held in Doha, imports by 14.8 percent. This represents a significant Qatar in November 2001 included statements on impact on trade and affect prospects of developing standards and their impact on market access for countries who continue to rely on exports of agricultural developing countries. These issues will continue to be commodities, such as bananas. The findings also suggest important in trade policy dialogues. It is assumed-and that the lack of consensus on international standards and evidence from recent analysis confirms-that food safety divergent national regulations on pesticides is costly. For standards can affect the ability of agricultural producers example, the authors estimate that if the world were to to meet regulatory standards set by importing countries. adopt a standard at a level of regulatory stringency Wilson and Otsuki explore a fundamental question in suggested by Codex (the body charged with setting food safety and environmental standards: Do regulations global standards in this area), in contrast with one set at on pesticide have an effect on trade? the level in place in the European Union, there would be The authors examine regulatory data from 11 OECD a US$5.3 billion loss in world exports. importing countries and trade data from 19 exporting This paper-a product of Trade, Development Research Group-is part of a larger effort in the group to examnine the link between trade, regulation, and development. Copies of the paper are available free from the World Bank,