Trade Facilitation: How the burden of documentary and border procedures impact exports to the EU

Abstract: How to increase trade flows in today's globalized world is a relevant topic and the incentives to do so are exemplified by the WTO Trade Facilitation Agreement that came into force in 2017. Inefficient trade procedures have proven to aggravate and decrease trade. Inefficient trade procedures could be obtaining, preparing and submitting documents about the traded good to authorities, as well as customs clearance and inspections at the border. In this paper we investigate how the world's exports to the EU are affected by these procedures. We contribute to already existing literature by using recently released data from the World Bank on time for documentary and border compliance and investigate their impact on exports. The empirical analysis is conducted by using a gravity model with panel data and a fixed effects Poisson Pseudo-Maximum Likelihood (PPML). We find that a 1% decrease in time for documentary compliance would increase the world´s exports to the EU by 0,164%, while no such relationship can be found between border compliance and exports. However, when estimating a model with four income per capita groups, we find these relationships not to be linear which implies that different areas of reform are suitable for different countries.