Uunderstanding the benefits of regional integration to trade: The application of a gravity model to the case of Central America

El Salvador: Building on Strengths for a New Generation

“…Exporters have not experienced appreciable growth in either export lines or markets since the signing of the regional free trade agreements. Bilateral trade in Central America remains an agenda of largely untapped opportunities, as evidenced by the negative elasticity of bilateral trade to different factors including adjacency and time adjusted distance (Marcelo, Stokenberga, and Schwartz 2010). This untapped potential can be attributed to deficiencies in infrastructure, burdensome processes and congestion at the border crossings limiting trade, even where distances are short.…”

“…Burdensome customs procedures, lack of regulatory harmonization (for example in terms of phytosanitary standards for agricultural exports), few established trade linkages, an atomized shipping industry, sparse information sharing on cargo and backhaul in trucking, and relatively few options and competition for shipping also limit the gains from trade free trade agreements. Transport and logistics costs can surpass 50 percent of the final price of goods traded, and it has been estimated that intraregional exports in Central America could double if the region achieved the adjacency and time distance factors of a truly integrated region (Marcelo, Stokenberga, and Schwartz 2010).…”

Poverty Reduction through Regional Integration: Technical Measures to Trade in Central America

“…Anecdotal evidence suggests that NTMs raise trade costs and inhibit trade in the region (Cato et al 2005, Gordillo et al 2010. However, due to data limitation, there is a dearth of empirical papers quantifying the economic effects of these regulations.…”