What can trade facilitation do for Ghana?

Abstract: The concept of trade facilitation has gained increased attention during the past decade. In today’s globalized world, the relative cost of inefficient trade procedures has increased. The underlying aim of this study is to investigate whether inefficient trade procedures affect exports. More specifically, whether Ghana can increase its export volumes and/or export diversification by engaging in trade facilitation. It is also investigated whether the impact on agricultural products differs in comparison to other product groups. The gravity equation and bilateral data on sub-Saharan Africa and the EU27 is used in order to quantify the impact of inefficient trade procedures on exports. This study makes use of the official cost to export a standardized 20-foot container as a proxy for trade procedures. The regression analysis suggests that Ghana, by engaging in trade facilitation, would gain in terms of increased export diversification but not in terms of export volumes. It is found that a reduction by 1% of the cost to export would reduce export volumes by 0.4% and increase export diversification by 0.2%. The impact on agricultural products was shown to not differ in comparison to other product groups. The policy simulation, which is based upon three potential scenarios, shows that a reduction of the cost to export would reduce Ghana’s export volumes by 5; 9 and 19% and increase export diversification by 2; 4 and 8%. The field study, carried out in Ghana, suggests that a trade facilitation reform would not increase export volumes or export diversification much. It is suggested that reforms within other areas are of greater importance in order to increase exports from Ghana. Two of those areas are to improve the access to credit in Ghana and to improve the infrastructure in the country. The answer to the question of what trade facilitation can do for Ghana is ‘not much’, at least not within the area of the cost, the documentation or the number of days to export.