Overlapping Trade Agreements: Stepping Stones or Stumbling Blocks?

Abstract: This paper analyzes the effect of overlapping Trade blocs on Trade Facilitation. Using the time, documents and costs incurred as trade facilitation indicators, simulations show interesting yet important effects of an increase in Regional Trade Agreements on trade costs. The results suggest that when it comes to increasing regional trade agreements by 1%, costs are associated with an increase via the number of documents needed to export, by 0.05%, but reduce time delays by 0.08%. Countries related to Custom Unions are negatively affected by an increase in Regional Trade Agreements, with results showing that these countries face an additional burden of documentary compliance both for exporting and importing by 0.09% and 0.13%. Costs of exporting and importing are however reduced by 0.13% and 0.07% respectively. Understanding these effects offers important insight into how countries can better negotiate trade deals that are geared towards wholesome reduction of trade costs, including non-tariff barriers to trade.