From Trade Preferences to Trade Facilitation: Taking Stock of the Issues

Abstract

The objective of the paper is to explore and give an overview of two central policy alternatives to improve the integration between the European Union and developing countries by removing barriers to trade: trade preferences and trade facilitation. The author reviews the relevant literatures and discusses the issues which constitute problems or opportunities for practitioners and researchers in both areas. She concludes that while at least some trade preferences actually have been less of a failure than their reputation suggests, trade facilitation is a far more promising policy option for the future. IntroductionThe European Union (EU) is the largest trading partner for many of the world's developing countries, but there is nevertheless a large potential to expand that trade. Given that increased trade is widely believed to be one of the keys to alleviating poverty and improving standards of living in developing countries, from a policy perspective it is crucial to understand the options available for economic integration between the EU and developing countries. The objective of this paper is therefore to explore and give an overview of two central policy alternatives to improve the integration between the EU and developing countries by removing barriers to trade: trade preferences and trade facilitation. Nonreciprocal trade preferences for low-and middle-income countries have been used by the European Union since at least the 1960s, and have in a broader sense been at the heart of the North-South trade policy debate for the last half century. By contrast, trade facilitation, i.e. loosely speaking cutting red tape at the border, is a relatively new issue, but one that has quickly risen high on the policy agenda. The paper starts by defining what trade preferences are and what they are meant to achieve, and then puts this policy option into its historical context. Noting that many commentators tend to regard trade preferences as a failed policy -something which interestingly is not necessarily what the reviewed empirical research finds -the paper discusses several dimensions that may be important when determining preferences' trade-creating potential.The paper then moves on to discuss how to define trade facilitation, outline why and how inefficient trade procedures constitute costs for traders and give an overview of what the likely economic effects are of reform in the area. In particular, the empirical literature on trade facilitation is reviewed, including the few papers that explicitly link trade facilitation and European integration. This section also gives examples of concrete measures that governments could take to reduce transaction costs related to inefficient trade procedures, and it closes by considering how to properly measure trade facilitation, and what kind of data researchers would need to better be able to analyze the causal effects.The last section summarizes the historic shift from a focus on trade preferences in trade relations between industrialized and developing countries to a fo...

EU Trade Preferences and Export Diversification

“…There has been quite a lot of policy debate about whether trade preferences actually lead to larger export flows, but fairly extensive research suggests that the goal is typically met. For an overview of the literature, see Persson ().…”

EU Trade Preferences and Export Diversification

“…Among the papers that have studied EU preference programs are Sapir (1981), Oguledo and Macphee (1994), Nilsson (2002), Péridy (2005) and Persson and Wilhelmsson (2007). Persson (2012) offers a review of the literature.…”

“…There has been quite a lot of policy debate about whether trade preferences actually lead to larger export flows, but fairly extensive research suggests that the goal is typically met. For an overview of the literature, see Persson (2012).…”

Relationship between logistics infrastructure and trade: Evidence from Spanish regional exports

“…In this regard, the geographical distance between a region and its main trading partners, together with trade facilitation, 1 are often considered the factors that explain a region's competitive position in international markets (Wilson et al, 2005;Martínez-Zarzoso and Márquez-Ramos, 2008;Márquez-Ramos et al, 2012;Persson, 2012;Márquez-Ramos and Aparisi-Caudeli, 2013). However, it is important to take into account other physical and geographical aspects that the literature on the topic has largely neglected, namely factors related to access to logistics services.…”