Global trade costs have declined by 15% in the last 19 years – WTO

Wale Ameen
Online Editor

Global trade costs have declined by as much as 15 per cent between within the last 19 years, that is between 2000 and 2018, so says the World Trade Organization’s Trade Cost Index.

The report which uses estimates of bilateral trade costs for 43 economies and 31 sectors, takes a look at the evolution of trade costs over time using the incidence of trade costs across economies and sectors. It also takes into view different household income groups by gender, firms size and skill groups as well as identify main factors determining trade costs.

According to the organisation, further updates will look into capturing the cost of market uncertainty including the impact of COVID-19.

According to the WTO, the methodology used for this study introduces a number of improvments. It states that it allows for sector-specific elasticities of trade flows to trade costs for both goods and services.

Also, the report states that, ” it allows the estimation of directional trade costs, thus offering more realistic estimates of trade costs. Directional trade costs also allow us to estimate the incidence of trade costs on different groups of consumers and producers.”

The core findings of the report are as follows:

• Global trade costs have declined by 15 per cent between 2000 and 2018.
• Trade costs for services are higher than trade costs for agricultural goods. Trade costs for manufactured goods are the lowest.
• Overall trade costs are higher for women, SMEs, and unskilled workers.
• High-income groups face higher trade costs, given their larger share of consumption in services.
• Trade policy barriers and regulatory differences are estimated to account for at least 14 per cent of trade costs in all sectors. They include tariff and non-tariff barriers, regulatory differences, as well as other policies covered by trade agreements, such as a lack of investment facilitation or of intellectual property protection.
• Trade policy barriers are relatively the most important component of trade costs for trade among low income economies.
• Transport and travel costs together with information and transaction costs explain the largest share of trade costs between high-income economies.

The Trade Cost Index is produced by the Economic Research and Statistics Division (ERSD) of the WTO to complement other statistics that it provides on trade costs such as average tariffs or the number of non-tariff measures.